New
lending rules that cap personal loans and banking fees will take a toll on
banks operating in the UAE, the head of HSBC in the country said.
The Gulf
state’s central bank moved in February to cap person loans at 20 times a
borrower’s monthly salary and said repayment periods can’t exceed 48
months.
Monthly installments for all loans, including personal, car,
housing loans and credit cards, must not exceed 50 percent of a customer’s
gross salary and any regular income, the central bank said.
Abdulfattah Sharaf said the rules would hurt lenders but
would aid in controlling lending.
“It [the
new lending regulations] will impact all of the banks but at the end of the day
it’s looking at the positive side of it, not just the negative,” Sharaf, CEO
for HSBC UAE, said.
Record
high oil prices coupled with a five-year property boom saw lending in the UAE
increase 30 percent annually during 2005 and 2010. Bank lending in the UAE
increased 1.3 percent in 2010 compared to 2.4 percent in 2009, according to
Central Bank data.
Nomura
International warned in March the new rules would impact fee income at Abu
Dhabi Commercial Bank and First Gulf Bank and could pressure profits.
HSBC said on Tuesday it planned to lay off up to three
percent of its 12,000-strong workforce in the Middle East and North Africa as
it seeks to cut costs. However, the bank’s head of commercial lending in the UAE said operations
in the Gulf state were expected to grow in 2011.
“We
would expect our business to grow at least at the same rate as it did in 2010
and have expectations for it to grow faster,” said Nick Levitt, head of
commercial banking, HSBC UAE.
Recent political turmoil across much of Middle East and
North Africa has also affected the region’s investment climate, but Levitt said
the unrest had minimal impact on UAE business.
“We have
seen some positive signs that have come through. For people relocating into the
UAE, for example, we [have] noticed an increase in hotel occupancy, we’ve seen
some centralisation of treasury funds across the region, [and] we’ve seen some
fund managers on the flip side, rebalance their portfolios back into more
mature markets,” he said.
“Clearly
this is a core market for us within the region. There will be positive impacts
and there will be less positive impacts, we just have to monitor them both near
term and long term.”
In
February HSBC posted net income of $13.2bn in 2010, up from $5.83bn the
previous year. Profits for its Middle East operations increased to $892m
from $455m a year earlier while the number of employees in the region increased
to a two year high.
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