HSBC said on Monday its non-performing loans portfolio had risen between the final quarter of 2008 and the first quarter of this year as more borrowers in the UAE defaulted.
While there had been no “dramatic” increase in bad loans over the period, the bank said it was reviewing the amount of provision put aside for potential loan losses.
Venkatesh Srikantan, regional head of assets and liabilities at HSBC told Arabian Business: “From the Q4 2008 to Q1 2009…there has been an upward trend in non-performing loans but nothing that has been materially damaging to the bank per say.”
At the end of December 2008, HSBC Middle East had $323m worth of non-performing loans up from $274m the year before, and $379m of provisions to cover any losses on their loan book.
“We watch these situations closely and in times like these from an accounting perspective you provision more prudently, so you have provision that is higher than your non-performing loans,” he said.
“We are watching the numbers as they are coming through. There is no material change to that [loan provision] at this point in time,” Srikantan added.
HSBC said non-performing loans-loans that have not been written off but are not paying the bank any interest- had mainly impacted its credit card and personal loan business rather than its mortgage division.
Concern over delinquencies and defaults are rising sharply in the UAE because of mounting job losses mainly in real estate and construction.
In recent months banks recently have tightened lending to minimise their exposure to defaults,
In November, HSBC doubled the minimum salary someone must earn to qualify for a personal loan from AED10,000 to AED20,000.
The bank confirmed that it employs debt recovery firms around the world to trace customers who have fled the UAE without paying off loans.
“There is a concept of debt recovery process and it does use in house resources and external resources,” Venky said, adding that there had not been a ‘significant’ expansion of the operation in the last few months.
Asked whether the bank can trace customers abroad who had failed to repay debts, Srikantan replied: “The answer is definitely yes.”
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