HSBC chief sees start of Mideast recovery

The head of HSBC Middle East has said he believes the region is starting to recover from the global downturn, but he does not expect a rapid economic turnaround.

The bank, which had to sharply boost its credit provisions in the first half of the year, sees the trend in non-performing loans holding steady over the next six months, chief executive Simon Cooper said.

"We will continue to see growth in revenues, and NPL's will be level," Cooper said, at the Reuters Middle East Investment Summit. "The worst is over."

HSBC Middle East saw its first-half loan impairment charges and credit risk provisions jump to $391 million from $41 million a year earlier. The bank reported $643 million in first-half, pretax profit in August.

"The trend in NPLs is to continue for some months to come, the next six months or so," Cooper said. "Provisioning levels will stay roughly where they are."

In August, ratings agency Moody's downgraded HSBC Middle East, citing pressure on the lender's asset quality and profitability in the region, particularly in the United Arab Emirates.

The bank was one of the first in the country to tighten lending conditions for its retail banking operations as the economic crisis hit, and the risk of loan defaults increased.

"As conditions improve we will of course look at whether those criteria still apply and whether factors have come to pass that changed them," Cooper said.

"But as of today I think the approach we've adopted has been vindicated in terms of the market and its our responsibility ... not to overleverage the customer."

Banks in the UAE, and particularly in Dubai, were affected by a squeeze in lending as liquidity tightened. Earlier this month, the regional chief executive for Standard Chartered Bank, Shayne Nelson, said the UAE still faced a liquidity shortfall of around $11 billion, based on the gap between loans and deposits.

Cooper however said he saw no such shortfall.

"I don't see there's a liquidity shortage in the UAE," Cooper said.

HSBC is the largest foreign bank operating in the UAE. Earlier this month, the lender announced it was cutting 122 positions in the country, after announcing 80 job cuts earlier in the year. (Reuters)

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