By Stanley Carvalho
Central bank governor Al-Suweidi says banks' exposure will be 'marginal'.
Exposure to mortgages by banks in the UAE is limited and will not affect their profits in 2007, the UAE central bank governor said on Wednesday.
Banks in the UAE have been returning to profit growth this year after a stock market crash in 2006 hit earnings. Four of the six largest lenders either beat third-quarter profits forecasts or came in at the top of end of the range.
"The exposure of UAE banks is below the specific threshold of... 20% of total deposits of banks. So this percentage is below the level with a good proportionate margin," Sultan Nasser Al-Suweidi told a housing finance conference.
"Structured loans that take mortgage as collateral are not developed in the UAE and subprime is not available in the UAE, so banks' exposure here is marginal. It won't have a significant impact on the profits of 2007," Al-Suweidi said.
The central bank said last month that UAE exposure to high-risk US home loans, was marginal and limited to a few banks, without giving details.
Most UAE banks have reported no losses from the credit market crunch.
Abu Dhabi Commercial Bank (ADCB), the second largest lender in Abu Dhabi, said losses on its investment portfolio from a global credit crunch reduced third-quarter profit by 70 million dirhams ($19.07 million).
Bahrain's central bank said on Monday it wants to limit banks' exposure to the real estate market and proposed capping the value of the mortgages they can offer at 25% of total loans. (Reuters)