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Discuss this article (20 Comments)HSBC sees increase in UAE loan defaults
by This email address is being protected from spam bots, you need Javascript enabled to view it on Monday, 30 March 2009
zoomBANK LOANS: HSBC says it has seen an increase in defaults but nothing to materially damage the bank. (Getty Images)
HSBC said on Monday its non-performing loans portfolio had risen between the final quarter of 2008 and the first quarter of this year as more borrowers in the UAE defaulted.
While there had been no "dramatic" increase in bad loans over the period, the bank said it was reviewing the amount of provision put aside for potential loan losses.
Venkatesh Srikantan, regional head of assets and liabilities at HSBC told Arabian Business: “From the Q4 2008 to Q1 2009...there has been an upward trend in non-performing loans but nothing that has been materially damaging to the bank per say.”
At the end of December 2008, HSBC Middle East had $323m worth of non-performing loans up from $274m the year before, and $379m of provisions to cover any losses on their loan book.
“We watch these situations closely and in times like these from an accounting perspective you provision more prudently, so you have provision that is higher than your non-performing loans,” he said.
“We are watching the numbers as they are coming through. There is no material change to that [loan provision] at this point in time,” Srikantan added.
HSBC said non-performing loans-loans that have not been written off but are not paying the bank any interest- had mainly impacted its credit card and personal loan business rather than its mortgage division.
Concern over delinquencies and defaults are rising sharply in the UAE because of mounting job losses mainly in real estate and construction.
In recent months banks recently have tightened lending to minimise their exposure to defaults,
In November, HSBC doubled the minimum salary someone must earn to qualify for a personal loan from AED10,000 to AED20,000.
The bank confirmed that it employs debt recovery firms around the world to trace customers who have fled the UAE without paying off loans.
“There is a concept of debt recovery process and it does use in house resources and external resources,” Venky said, adding that there had not been a ‘significant’ expansion of the operation in the last few months.
Asked whether the bank can trace customers abroad who had failed to repay debts, Srikantan replied: “The answer is definitely yes.”
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
Banks policy
Posted by Piumi, Dubai, UAE on Thursday 3 September 2009 at 07:30 UAE time
Banks should be more flexible when it comes to taking the money back what they have lend. Banks have a very bad approch in UAE where they dont want to even listen. In a way I am happy that many people leave without paying as that is the only way that we have to make the banks understand that they are stupid.
Posted by Piumi, Dubai, UAE on Thursday 3 September 2009 at 07:30 UAE time
Banks should be more flexible when it comes to taking the money back what they have lend. Banks have a very bad approch in UAE where they dont want to even listen. In a way I am happy that many people leave without paying as that is the only way that we have to make the banks understand that they are stupid.
Loan Default
Posted by Alexa Ribay on Sunday 3 May 2009 at 03:58 UAE time
I left the UAE before the "recession" for greener pastures. I left behind a huge debt which I continued paying from overseas. However, the income I was getting was less than what I was earning and it came to a point when I could not afford the repayments anymore. To cut my story short, the debt collection company reached me eventually but the bank was quite bull-headed about me paying less than the original repayments and threatened to repatriate me back to Dubai and put me in jail. Here I am, willing to do my share at my best possible resources (I do have kids to feed and am a single parent) and they are hell bent on just sending me to jail where they won't get anything out of me as I have no assets at all. Would someone send the message to the banks to be more understanding of people who have no other resources and options? Thank you.
Posted by Alexa Ribay on Sunday 3 May 2009 at 03:58 UAE time
I left the UAE before the "recession" for greener pastures. I left behind a huge debt which I continued paying from overseas. However, the income I was getting was less than what I was earning and it came to a point when I could not afford the repayments anymore. To cut my story short, the debt collection company reached me eventually but the bank was quite bull-headed about me paying less than the original repayments and threatened to repatriate me back to Dubai and put me in jail. Here I am, willing to do my share at my best possible resources (I do have kids to feed and am a single parent) and they are hell bent on just sending me to jail where they won't get anything out of me as I have no assets at all. Would someone send the message to the banks to be more understanding of people who have no other resources and options? Thank you.
Evidence Based
Posted by James, Dubai on Thursday 2 April 2009 at 10:52 UAE time
Simply by reading the comments here, there seems to be a genuine acceptance that running is the only way out if a debtor gets in trouble. And maybe it is.
Banks take note! Drop your rates and make arrangements for people to pay back. Even at 0% you can recover your principle which is better than losing the lot.
The general mindset of pay or run, simply shows how broken the whole system is. It also shows, how despite the chaos the financial mess here is still not being managed intelligently. Of course - the same bankers that got us into this are now trying to get us out. They clearly dont have the credentials to do this as they have aptly demonstrated.
For the past few years banks have done everything to entice people into debt and charged outrageously to do this.
Thousands of Dirhams for loan setups, valuations, letters etc. Way way above the value of the work actually done. The banks were as predatory as the estate agents and as morally challenged.
They phoned customers and offered them 0% interest. What nonsense! It was only for a couple of months. Then they offered 2%. More deception. That was PER MONTH. No wonder people got into trouble. They played numerical games and took advantage of the less educated. The losses they are booking they should never have had anyway - if they charge appropriately.
The banks should be establishments of conservative practice not used-car salesyards. Now that they are in trouble they pretend to be the aggrieved party. They are equally as responsible as the debtors and whichever management encouraged these practices should be charged with seriously endangering the country's economy.
The banks have conspired to commit economic sabotage. Their management should be called to account.
Posted by James, Dubai on Thursday 2 April 2009 at 10:52 UAE time
Simply by reading the comments here, there seems to be a genuine acceptance that running is the only way out if a debtor gets in trouble. And maybe it is.
Banks take note! Drop your rates and make arrangements for people to pay back. Even at 0% you can recover your principle which is better than losing the lot.
The general mindset of pay or run, simply shows how broken the whole system is. It also shows, how despite the chaos the financial mess here is still not being managed intelligently. Of course - the same bankers that got us into this are now trying to get us out. They clearly dont have the credentials to do this as they have aptly demonstrated.
For the past few years banks have done everything to entice people into debt and charged outrageously to do this.
Thousands of Dirhams for loan setups, valuations, letters etc. Way way above the value of the work actually done. The banks were as predatory as the estate agents and as morally challenged.
They phoned customers and offered them 0% interest. What nonsense! It was only for a couple of months. Then they offered 2%. More deception. That was PER MONTH. No wonder people got into trouble. They played numerical games and took advantage of the less educated. The losses they are booking they should never have had anyway - if they charge appropriately.
The banks should be establishments of conservative practice not used-car salesyards. Now that they are in trouble they pretend to be the aggrieved party. They are equally as responsible as the debtors and whichever management encouraged these practices should be charged with seriously endangering the country's economy.
The banks have conspired to commit economic sabotage. Their management should be called to account.
Various charges on credit card
Posted by Riz, Mumbai, India on Wednesday 1 April 2009 at 18:37 UAE time
The banks has given high credit card limit to their customers and provoked then to use it all with vrious schemes and now when the economic slowdown apperars they are reducing the credit limit and putting high late payment charges, overlimit charges and finance charges leaving people with no hope to live in UAE which results in escape. I think government should appoint a special commitee who aggressively take the victims to the banks and fix the repayment of credit card without the abovementioned charges so that they can stay in UAE because no body want to run from the country where they are earning as their family is dependent on them. UAE Government have to focus on this issue to safeguard bank as well as the resident before it gets too late and people fly to their respective countries. An economy is mad by people not the money, so please preserve them.
Posted by Riz, Mumbai, India on Wednesday 1 April 2009 at 18:37 UAE time
The banks has given high credit card limit to their customers and provoked then to use it all with vrious schemes and now when the economic slowdown apperars they are reducing the credit limit and putting high late payment charges, overlimit charges and finance charges leaving people with no hope to live in UAE which results in escape. I think government should appoint a special commitee who aggressively take the victims to the banks and fix the repayment of credit card without the abovementioned charges so that they can stay in UAE because no body want to run from the country where they are earning as their family is dependent on them. UAE Government have to focus on this issue to safeguard bank as well as the resident before it gets too late and people fly to their respective countries. An economy is mad by people not the money, so please preserve them.
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