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Thu 19 Nov 2009 06:39 AM

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UAE banks' Saad, Algosaibi exposure seen at $2.9bn

At least 13 UAE babnks, seven foreign banks affected, says central bank.

Banks in the UAE have a total exposure of $2.9 billion to Saudi groups Saad and Algosaibi, the UAE central bank said  in its first detailed disclosure on the matter.

At least 13 UAE banks and seven foreign banks have exposures to Saad Group and Ahmad Hamad Algosaibi and Bros Co (AHAB), the central bank said in a statement.

It did not name the banks, nor did it provide individual exposures. Banks and investors in the region have been concerned about the fallout from debt restructuring at the two family-owned Saudi groups.

"Their funded and unfunded exposures amount to $2.9 billion," the statement said.

The central bank directed banks to take provisions of 50 percent on exposures to Algosaibi and the same on exposures to Saad.

It also told them to take 100 percent provisions on exposure to The International Banking Corporation (TIBC), and Awal Bank, subsidiaries of Algosaibi and Saad, respectively. Both banks came under the control of the Central Bank of Bahrain in July.

The provisions must be booked before Dec. 31, it said, adding that the central bank would inform banks if additional provisions are required in 2010.

Profitability of the banks in 2009 is estimated to be lower at AED20 billion ($5.5 billion) compared to AED26.8 billion in 2008, the central bank said.

"Although these provisions are considered substantial, the expected profits of all banks in the UAE, after deducting such provisions, may reach AED20 billion at the end of 2009, compared to profits of AED26.8 billion during 2008, it is therefore considered good under the current circumstances," the statement said. (Reuters)

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