As per Dubai's Khaleej Times, both S&P and UBS are predicting a rough 2010 for Gulf banks due to increased non performing loans ("NPLs"). Kuwait, Bahrain, and the UAE are expected to be the hardest hit with Saudi and Qatar banks enjoying better fortunes.
UBS estimates that currently 12.2% of HSBC UAE's loans and 9.5% of Standard Chartered UAE's loans are non performing. It also predicts that for UAE banks as a group NPLs will reach 15% and remain high during the next three or so years.
On the other hand, the CB UAE sees the NPL ratio climbing to 6.4% (up from 4.4%) in 2010.
Clearly, both scenarios can't be right.
I'm betting on an increase - fueled by the knock on effects of the Dubacle on the corporate sector as well as personal loans. There is a time bomb in the GCC with the latter. Banks have been imprudently lending to consumers and allowing them to pile on unsustainable amounts of debt.
I'm betting on an increase - fueled by the knock on effects of the Dubacle on the corporate sector as well as personal loans. There is a time bomb in the GCC with the latter. Banks have been imprudently lending to consumers and allowing them to pile on unsustainable amounts of debt.
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