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Mon 27 Dec 2010 12:33 PM

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Dubai shares drop to 3-month low on Saudi provisioning concern

UPDATE 1: UAE cenbank asks lenders to raise provisions toward Saad, Algosaibi groups

Dubai shares drop to 3-month low on Saudi provisioning concern
STOCK WATCH: Saudi Arabia’s Saad and Algosaibi groups defaulted on at least $15.7bn of loans last year (Getty Images)

Dubai shares fell to the lowest
in more than three months, led by Emirates NBD, as Al Khaleej said
the UAE central bank asked lenders to increase
provisions toward Saad and Algosaibi groups.

Emirates NBD,
the country’s biggest bank, slid the most in more than seven months and
Dubai Islamic Bank lost for a second day. Dubai’s DFM General
Index retreated 1 percent to 1,603.38, the lowest since September 13, at
1:07 p.m. in the emirate.

 The measure has lost 11 percent this year,
headed for its worst performance since 2008. The Bloomberg GCC 200
Index of companies in the region dropped 0.3 percent.

"The
interesting topic today is the increase in provisions to 80 percent for
Saad debt. This impacts all the banks negatively," said Ahmed Talhaoui,
Abu Dhabi-based head of investment at Royal Capital. “It is almost a
total write-off.”

The DFM
Financial Banks Index fell 1.8 percent, the most since November 2 and Abu
Dhabi’s benchmark index declined 0.3 percent.

The UAE central bank
asked financial institutions to raise provisions toward Saudi Arabia’s
Saad and Algosaibi groups to 80 percent of their debt, Al Khaleej
reported today, citing a circular signed by the governor Sultan Bin
Nasser Al Suwaidi.

The provisions need to be set aside by December 31, it
said.

                         

Saudi Arabia’s
Saad and Algosaibi groups defaulted on at least $15.7bn of loans
last year.

The two Saudi family groups have borrowed from more than 80
regional and international banks, including Paris-based BNP Paribas,
New York-based Citigroup Inc. and Arab Bank in Amman, Jordan,
according to documents provided by lenders.

Calls and e-mails from Bloomberg to the central bank weren’t immediately answered.

Emirates NBD
fell 4.8 percent, the most since May 9, to AED2.75. The bank said
in October it set aside money in the third quarter to cover 70 percent
of its exposure to the troubled Saudi groups. Dubai Islamic, the
largest Shariah- compliant lender in the country, lost 0.9 percent.

Qatar’s and
Bahrain’s measure both decreased 0.2 percent, Saudi Arabia’s Tadawul
All Share Index dropped 0.3 percent and Kuwait’s SE Price Index lost
0.1 percent.

Oman’s market is closed for a holiday.

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