x Abu Dhabi, UAE Friday 21 July 2017

UAE banks exposed to Saudi firms

Document discloses 88 banks had lent over $7.4bn to the Saad and Al Ghosaibi groups.

More than 10 banks in the UAE are involved in syndicated loans worth US$767.5 million (Dh2.81 billion) to two troubled Saudi conglomerates, according to a document obtained by The National. The total loan exposure of 88 global banks to the two firms, the Saad and Al Ghosaibi groups, amounts to just over $7.4bn, according to the document circulating among some bankers. The document reveals in more precise detail than before the exposures of banks to a series of large loans made to Saad Group, Ahmad Hamad Al Ghosaibi & Brothers, and their subsidiaries.

They include a $2.8bn loan to Saad Investments, a $2.75bn loan to Saad Group, a $300m term loan to Saad Trading and $610m in two loans to the Bahrain-based Awal Bank, which is controlled by Saad. Topping the list of banks that gave syndicated loans to the groups are BNP Paribas, with $522.5m, and Citigroup, with $515m. According to the document, Abu Dhabi Commercial Bank (ADCB) has the highest exposure to Saad and Al Ghosaibi among lenders from the UAE, amounting to $250m in four syndications, while Mashreqbank has $210m in four separate loans. Other affected UAE banks include National Bank of Abu Dhabi (NBAD), Emirates NBD, First Gulf Bank and Union National Bank. Their exposure through syndicated loans amounts to $767.5m.

Saad Group first ran into trouble last month, when the Saudi central bank moved to freeze bank accounts owned by Maan al Sanea, the billionaire founder and chairman of the company. Meanwhile, The International Banking Corporation, a Bahraini bank owned by Al Ghosaibi, went into default on some loans in May, leading to a formal restructuring of Al Ghosaibi's debts. Saad said last month it was planning to embark on a restructuring of its own.

The UAE Central Bank last month instructed local banks to cease lending to Saad and Al Ghosaibi. Analysts say exposure to the two groups is not limited to the syndicated loans detailed in the document and could include other debt instruments, such as bonds. A Bloomberg report last week said Al Ghosaibi alone owed $9.2bn to more than 100 banks. Raj Madha, an analyst at the Egyptian bank EFG Hermes, said: "There could be a significant amount of bilateral loans to both groups apart from syndicated exposure."

Among the banks with the lowest exposure to the Saudi firms through syndicated loans is NBAD, which contributed $7.5m to a $700m term loan to the Al Ghosaibi group. NBAD, the largest bank by market capitalisation on the Abu Dhabi Securities Exchange, said the bank's exposure was "not material". Amelia Soares, a spokeswoman for NBAD, said: "When compared with NBAD's total loan portfolio, we consider our exposure to the two groups to be negligible."

First Gulf Bank, ADCB and Mashreqbank confirmed they had exposure to the Saad and Al Ghosaibi groups, without specifying amounts. The banks said they had set aside enough money to shield themselves from potential losses. Union National said it had nominal exposure to Al Ghosaibi, while Emirates NBD did not comment. John Iossifidis, the head of international banking at Mashreq, said: "In the interests of client confidentiality it is not possible to disclose further details at this stage. However, we feel the dimension to this workout is manageable, relative to our size and strength."

The Central Bank said last week that it would release official details on the UAE banking sector's exposure to the groups, but no information has been provided yet. shamdan@thenational.ae skhan@thenational.ae