x Abu Dhabi, UAESaturday 22 July 2017

Fund manager snubs Emirates' lenders

The fund manager T Rowe Price is bullish on banks in the Middle East and expects a revamp in lending growth this year, but remains wary of lenders in the UAE.

DUBAI // The fund manager T Rowe Price is bullish on banks in the Middle East and expects a revamp in lending growth this year, but remains wary of lenders in the UAE. "A lot of the problems in the banking sector in the region - and I exclude the UAE, specifically Dubai - seems to have passed and the outlook for lending growth and earnings prospects in the banking sector is significantly better," said Joseph Rohm, the portfolio manager for the Middle East and Africa fund.

But Mr Rohm said he kept clear of financial stocks in the UAE, especially Dubai, in the absence of any clarity in the debt restructuring involving Dubai-based companies. "Stock markets do not like uncertainty and until we get an announcement on the restructuring and the standstill agreements, I don't see the Dubai markets performing," he said. Mr Rohm said he preferred banks in countries such as Saudi Arabia, Qatar and Oman where infrastructure spending was expected to increase substantially, with strong macroeconomic fundamentals backed by the region's rich oil reserves.

"Because these are still very nascent markets and capital markets are not very well developed, banks are often a good way to get exposure to broad macroeconomic trends," he said. "That is what we have tended to do." Mr Rohm said his portfolio included lenders such as Saudi Arabia's Samba Financial Group, Bank Muscat, Commercial Bank of Qatar and Qatar National Bank. He said a new mortgage law being introduced in Saudi Arabia might result in stronger mortgage lending in the next couple of years, although he did not expect any impact in the short-term.

The fund manager said banks in the region had also set aside enough provisions after asset-related issues last year, and valuations were attractive compared with global banks. Saudi Arabia accounted for a major part of Mr Rohm's portfolio. He said he was looking to build on his exposure and expected the country to open to foreign direct investments by the end of the year. * Reuters