Local loans to Saudi groups total $2.9bn

Uta Harnischfeger

• Last Updated: November 19. 2009 7:24PM UAE / November 19. 2009 3:24PM GMT

Local lenders have a total exposure of US$2.9 billion (Dh10.65bn) to the struggling Saudi conglomerates Saad Group and Ahmad Hamad Al Gosaibi and Brothers, the Central Bank says.

The first official confirmation of the value of lending to the two companies is at the high end of analysts’ estimates for UAE banks, which were between $2bn and $3bn.

The announcement comes a week after a unit of the Saad Group said it was unable to make payments on a $650 million Islamic bond maturing in 2012.

The Saad and Al Gosaibi groups have become enmeshed in several lawsuits after both conglomerates began to default on debt payments this year.

Banks and investors are estimated to be owed more than $20bn by the Saad Group and its subsidiaries, and lenders have taken legal action against the company in New York, the Cayman Islands and the Gulf.

Several local banks have already disclosed their exposures to investors. Abu Dhabi Commercial Bank is owed a total of $609m by the groups, while Mashreqbank is owed about $400m by Al Gosaibi, and is exposed to the Saad Group for $160m.

Abu Dhabi Islamic Bank has $100m in outstanding loans, while Emirates NBD, the country’s largest lender by assets, has called its exposure negligible.

Thirteen UAE banks and seven international lenders are owed money by the two groups, the regulator said, while repeating that lenders must set aside 50 per cent of their exposure to Saad and Al Gosaibi by the end of this year, and 100 per cent for loans to the Bahrain banks The International Banking Corp (TIBC) and Awal Bank.

The Central Bank also published an estimate of overall bank profits for this year. It said they would be about Dh20bn, compared with Dh26.8bn last year.

The regulator said the amount had to be “considered good under the current circumstances”.

But it is unclear whether the profit calculations account for general and specific provisions. So far in the year, UAE banks have set aside almost Dh10bn in new general provisions to prepare for defaults on loans, and Dh4bn to account for specific defaults such as Saad and Al Gosaibi.

The Central Bank also said more provisions might be required next year.

Al Gosaibi has accused Maan al Sanea, the billionaire founder of the Saad conglomerate, of masterminding a $10bn fraud against it. Mr al Sanea has denied the allegations.



uharnischfeger@thenational.ae