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Tue 15 Sep 2009 08:34 AM

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UAE loan defaults predicted to peak in Q3

Standard Chartered chief also says liquidity in banking sector is improving fast.

Non-performing loans in the UAE are set to peak this quarter with the number of defaults reducing towards the end of the year, a senior banking official has predicted.

Shayne Nelson, chief executive officer of Standard Chartered Bank, Middle East and North Africa also said he believed the liquidity in the UAE's banking sector was improving fast as the gap between loans and deposits continued to narrow.

In comments published by UAE daily Gulf News on Tuesday, he said the gap had narrowed from AED110 billion at the beginning of the year to about AED40 billion at the end of July.

"The liquidity of banks has improved substantially over the past few months due to the government and Central Bank support to the sector," Nelson told the paper.

On the overall quality of assets of banks in the UAE, Nelson said banks across the board were affected by the deterioration in the quality of all classes of assets during the last three quarters.

He said he expected the volume of non-performing loans (NPLs) to peak in the current quarter and subside in the months ahead.

Nelson was speaking to reporters on the sidelines of a press conference to announce the sponsorship agreement Standard Chartered signed with Liverpool Football Club.

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Holly Halston 11 years ago

From my own experience, and from someone who is working and do have the ability to pay back a mortgage during this down session, I tried with Rakbank twice, SCB aswell. None of them accepted providing me a loan because I'm in a family business. To be honest I don't believe a single word from this article and banks are really afraid of lending money to

robert 11 years ago

Further to the comment by Holly, RAK Bank increased their mortgage for existing customers by .5% so far this year when the rest of the world dropped rates! This adds further strain to the customer in difficult times.

John 11 years ago

I wonder why these people are writing so much of untruthful things! I have a business in Dubai for the last 6 years. Every time I approached this bank for a business loan, they have mercilessly turned down my application. I mean before and after recession. Do you think these Shylocks give more loans than deposits? Come on.

ekim selra 11 years ago

I have a mortgage loan with one of the big local banks. I received an advise from them on 1.1.2009 which stated that the interest rate would be amended to 7.11%. When I checked my loan statements in June, I realized that they had actually applied a much higher rate. They are now taking weeks and months to investigate this misrepresentation. My advise to all readers of AB who have loans, please check the interest debit entries - Do Not take things for granted. I will give this bank another 10 days to resolve my case before I make known more details of my case. All in all, I am charged Dhs 21000 excess over a period of 6 months + insurance costs being debited twice to my loan

Ana 11 years ago

To add to Ekim's comment, I'm going through the same ordeal with my mortgage lender - also one of the biggest local financial insitutions. I first raised my complaints in March. 6 months down the line still no result. I've already been talking to one of their EVPs but that turned out pointless as well. And it's not just the wrong % applied - it's the calculation method itself which is outrageous, against all basics of financial management and results in overcharging me on interest. And I thought Shariah compliant means not allowed to make profit on charging interest... Anyone wants to join in a complaint to RERA or Central Bank (or whoever regulates them)?

Alex 11 years ago

I have had an adjustable rate home loan with Amlak for the past 5 years (6% initial rate) and even though there is no clause in the initial contract that allows them to even change my rate beyond the 6% and there is no formula defined for the changes in the interest rates, they continue to change the rates to whatever rate they feel like and when you asked them for the reason, they simply say they are entilted to change it to whatever they like. My interest rate today (8.75%) is higher than what it was last year and the previous years despite the international rates coming down sharply.

SR 11 years ago

To my knowledge fixed rate mortgages are non-existant, even if there are, banks will still include the clause reserving the right to increase rate based on market. Most common is to mark-up to a benchmark (EIBOR / LIBOR), with a floor / minimum rate. So if the benchmark rate increases, your mortgage rate also increases. But when the benchmark decreases, your mortgage rate will not go below the floor / minimum rate. These are not very favorable conditions from the point of the borrower, but you got to understand that banks are not lending their own money! Most of these conditions are given in offer letters, but generally we tend to overlook / take lightly at the time of taking the loan. Furthermore, bank interest rates are also based on a risk premium; i.e. higher the risk, higher the interest rate. Given what real estate sector is going through in the UAE most banks may have increased their risk premium on mortgages as well, thus further increasing the applicable rate. Please, not that I do understand your predicament but just tried to give a possible explanation and a basic working on bank interest rates.

mg 11 years ago

I am in the same boat with probably the same bank, double insurance payment and a rate that i cant work out

Peter 11 years ago

I've looked into a number of complaints about moving interest rates, and in most cases the financial institution is wholly in the wrong. In some cases the cenrtal bank has intervened already, such as banks independently changing EIBOR and ignoring the official number for EIBOR, and also altering interest rates unilaterally. Consequently some customers have found redress. However, clearly a much more rigorous system needs to be found to ensure that banks adhere to minimum standards of customer service, including sticking to contracts. Where is, for example the Banking Ombudsman? Unfortunately nowhere in this country.

Aman 11 years ago

I agree with you alex! What is the logic of Amlak revising it's rates to 8.75%, when all around the world the interest rates are going down. Moreover normally banks around the world do not increase the installment amount but they increase the tenure of loan in case of rise in interest or profit rates. It's not justified to pay extra money over the previously agreed installments especially when rental yields and overall earnings of people are going down.