Moody's downgrades three Dubai banks

Saturday, 8 December 2012 9:43 AM

Emirates NBD, the UAE's largest bank by assets.

Moody's Investors Service has downgraded three Dubai-based banks, including the emirate's largest Emirates NBD, on concerns about problem loans.

The rating agency also put a fourth bank on watch for a possible downgrade owing to high levels of non-performing loans (NPLs).

Moody's lowered long-term ratings for Commercial Bank of Dubai and Emirates NBD to Baa1 from A3, Moody's said in a statement.

Mashreqbank's rating was also cut to Baa2 from Baa1 while all three were given a negative outlook.

The rating of a fourth lender, Dubai Islamic Bank, was put on watch for a possible downgrade.

A statement read: "Despite an improvement in the overall operating environment in Dubai, especially in the core sectors of trade, retail, tourism and transport, Moody's believes that Dubai-based banks continue to face persistent asset quality pressures, which emerged at the start of the crisis four years ago."

It added that problem loans levels remained elevated in the range of 15-17 percent, which is well above the average of Gulf Co-operation Council (GCC) banks at 6.1 percent.

Moody's said it expects problem loan levels to remain elevated over the coming quarters, driven by "exposures to large, stressed, government-related issuers" and "legacy corporate impairments, primarily real-estate-related".

"The delayed recognition of these problem loans is continuing to pressure asset quality of the affected banks, and Moody's believes that a limited reduction in headline NPLs is likely over the near term," the statement added.

The action comes despite a revival in Dubai's economy after several years of stagnation in the wake of the financial crisis.

Trade and tourism have picked up, but many banks are still saddled with large non-performing loans.

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Posted by: John Tuesday, 11 December 2012 12:34 PM[UAE] - uae

mashreq is the worst bank in this region........... they should cut further points.....

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Posted by: Thamir Ghaslan Monday, 10 December 2012 8:05 AM[UAE] - Saudi Arabia

Back in the 90s Saudi nationalized its banks, citing national security and giving employment opportunities to the locals, despite the usual stereotypes of the local being unqualified, unproductive, lacking working ethics, etc.

Fast forward today and we all know about the global financial meltdowns and how it unaffected Saudi banking.

He who laughs last...

Posted by: kingkaiser Monday, 10 December 2012 11:22 AM[UAE] - UAE

Thamir, the competence of employees had *nothing* to do with Saudi not being affected. Merely strong regulations from the Saudi Monetary Authority that forced banks to have a low loans-to-deposits ratio.
By your logic, banking employees at the top global institutions must be the laziest.

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Posted by: Mike Sunday, 9 December 2012 10:37 AM[UAE] - Canada

Im not surprised...espcially the mashreq bank downgrade.

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Posted by: Khaled Sunday, 9 December 2012 10:33 AM[UAE] - US

I have heard that one Islamic bank was warned by the audit corporation...
Brazil bank is too...

all eyes turn Islamic banks nowadays.

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Posted by: Hamid Sunday, 9 December 2012 10:32 AM[UAE] - Canada

The Banks in Dubai should be held accountable in this trajic downfall of the properties in Dubai.They must find a way to bailout people who trusted their speculations and lost everything.I would definitely call it as a very big trap and the Banks should have guts to share the loss and contribute in reviving the market once again. This is a very small market and any positive steps taken will help to bring back the lost confidence of millions of investors.I personally believe that all the loans should be written off. Or if someone wants to continue the loans should be adjusted accoding to the realistic market prices of the properties and not the same old faig prices.The Rera should also realise that the title deed charges are extremely high and they should be brought down to a maximum of 0.5% . May God help us to comeback from this man made Disaster. May God give us courage to help the mankind , instead of cheating , using and abusing. Only then we can have peace , prosperity.

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