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Wed 27 Jan 2010 01:06 AM

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Record provisions drag UAE's ADCB to Q4 loss

Bank posted Q4 loss of $326.7m after booking impairments of $544.5m in last period.

Record provisions dragged Abu Dhabi Commercial Bank (ADCB) to a much wider fourth quarter loss than expected, highlighting the scale of the debt crisis among the regional companies to which it is exposed.

Abu Dhabi's third largest bank by market value posted a fourth quarter loss of $326.7 million after booking impairments of $544.5 million in the last period alone.

Overall in 2009 it booked provisions of $1.05 billion.

ADCB and Emirates NBD, the Gulf state's largest bank by assets, are the only UAE banks negotiating with indebted state conglomerate Dubai World, which is grappling to restructure about $22 billion in debt.

ADCB has at least $2.1 - $2.4 billion of exposure to Dubai World and related entities, a senior executive of the bank said last November.

ADCB's CEO Alaa Eraiqat told Al Arabiya television that$462.8 million of the bank's provisions was linked to the UAE market.

The restructuring of two Saudi family firms is also expected to force UAE banks to write off more of their loan portfolios.

In November, the UAE central bank directed banks to take provisions of 50 percent on exposures to the two firms before the end of 2009, and said UAE banks had $2.9 billion Saudi exposure.

In a statement, Eissa al Suwaidi, chairman, ADCB, said: "This has been a difficult year, and net profitability has been impacted as a result of the current economic crisis and additional provisioning requirements."

Credit Suisse recently revised its estimates for UAE banks, and said it expected ADCB and Emirates NBD to record provisions of $272.2 million each in the fourth quarter.

ADCB's quarterly provisions were more than double that.

Vyas Jayabhanu, head of investments, Al Dhafra Financial Broker, said: "The only silver lining in this ... is that we hope the balance sheet is cleaned up."

ADCB made a full year net loss of $139.6 million, the company statement said, compared with a profit of $370.2 million in 2008.

The bank raised $1 billion in October as the first tranche of its $7.5 billion bond programme.

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