x Abu Dhabi, UAEFriday 28 July 2017

Banks downplay Saudi loans

Several leading banks in the UAE have exposure to the troubled Saudi business groups Saad and Al Gosaibi but maintain it is unlikely to affect their bottom line.

Abu Dhabi Commercial Bank declined to comment on its Saudi exposure  but insists its loans are backed up with cash deposits.
Abu Dhabi Commercial Bank declined to comment on its Saudi exposure but insists its loans are backed up with cash deposits.

Several leading banks in the UAE have exposure to the troubled Saudi business groups Saad and Al Gosaibi, but maintained yesterday that it was unlikely to affect their bottom line. Abu Dhabi Commercial Bank (ADCB), the emirate's largest lender, yesterday declined to comment on the extent of its exposure, but it said its loans were mostly backed up with cash deposits. "ADCB is in close contact with the relevant customers and is working with its financial advisers and the rest of the lenders on a speedy solution," said Ala'a Eraiqat, the chief executive.

Mashreqbank also has some exposure to the troubled groups, which it described as "not significant". Several banks in Oman have provided the total amounts of loans made to the companies. The National Bank of Abu Dhabi and First Gulf Bank also admitted exposure to the groups, without naming any sums. While NBAD called its exposure to the struggling groups "negligible", First Gulf Bank said in a statement to the Abu Dhabi Securities Exchange its loans were "not material".

"I don't think the impact from the Saad and Gosaibi families will impact the survival rate of our banking system," said Raj Madha, a banking analyst at EFG-Hermes. The defaults by the high-profile family businesses may force bankers to rethink the way they handle such firms in the region. "This is the first indication that lending to family enterprises may be not as benign as it seems," Mr Madha said.

Oman International Bank said on Wednesday it had no exposure to either of the two Saudi conglomerates. In contrast, BNP Paribas and Citigroup provided 16 per cent of the $6.3bn of syndicated loans owed by the billionaire Maan al Sanea and the Al Gosaibi family, making them the most exposed to Saudi Arabia's largest debt restructuring, according to Bloomberg News. HSBC, Standard Chartered, JP Morgan and other financial institutions also have exposure, the agency reported. Such large loans are typically originated by large bank syndicates who can then choose to sell on parts or all of the debt into secondary markets. Typically, banks keep a slice of the debt on their books. Mr al Sanea, the founder and chairman of Saad, has had his accounts frozen.

uharnischfeger@thenational.ae