GCC banks' Algosaibi exposure significant but manageable - S&P

The 30 commercial Gulf banks rated by Standard & Poor’s (S&P) have significant but manageable exposure to troubled Saudi conglomerates Saad and Algosaibi, the ratings agency said on Wednesday.

Exposure to the groups ranges from no exposure to net exposure of more than 20 percent of a few banks' adjusted total equity, S&P found in a survey.

Banks in Saudi Arabia and the UAE represent almost two thirds of the total net exposure of the sampled banks.

“Standard & Poor's believes that it is premature to assess the level of ultimate losses that creditors will face on their exposure to these two groups. We anticipate that only a few banks are going to allocate provisions against these exposures in the second quarter of 2009,” it said in an e-mailed statement.

S&P receives detailed information on the banks' largest exposures as part of its surveillance on rated bank credits but is unable to disclose information on individual banks.

“The Saad and Algosaibi restructuring discussions, in our view, suggest that high levels of concentration within GCC banks' loan portfolios create significant credit risks for these banks, mitigated by GCC banks' high earnings capacity, good capitalisation, and high level of loan loss reserves,” it said.

According to media reports, local and international banks are estimated to have around $16bn in exposure to the beleaguered Algosaibi Group and Maan Al-Sanea controlled Saad Group, who deny having any business links with each other.

On Friday, the former filed a suit against Al-Sanea in New York State’s supreme court, charging him with embezzling $10 billion from the company, which is controlled by his wife’s family.

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