x Abu Dhabi, UAEWednesday 17 January 2018

UAE lenders own up to troubled debts

Reports on exposure to Saad and Al Gosaibi groups requested by the DFM and ADX.

The UAE's two main stock exchanges asked listed banks to reveal their exposure to the Saudi conglomerates.
The UAE's two main stock exchanges asked listed banks to reveal their exposure to the Saudi conglomerates.

Banks across the UAE on Wednesday moved to reveal their exposure to the financially troubled Saad and Al Gosaibi groups after the market regulator demanded a greater level of disclosure. The UAE's two main stock exchanges asked listed banks to reveal their exposure to the Saudi conglomerates in response to a request from the Emirates Securities and Commodities Authority (ESCA).

The Abu Dhabi Securities Exchange (ADX) "can confirm a communication was issued to some listed companies as part of a routine process", an ADX spokesman said. "It should be appreciated that companies disclose information on a regular basis and will continue to do this as the need arises." The Dubai Financial Market (DFM) also asked its banks to disclose their exposure, without setting a deadline. "Typically, banks disclose in detail their exposure and provisions through quarterly and annual statements. In this regard, DFM would like to state that finance risk is common in day-to-day business for banks due to extending loans and facilities to different sectors," the DFM said.

Several UAE banks listed on the ADX on Wednesday posted statements in which they revealed their exposure to the Saudi groups. Some, such as the National Bank of Ras al Khaimah and the Commercial Bank International, said they had no exposure. The National Bank of Abu Dhabi said it had total exposure of US$8.7 million (Dh31.9m), while the National Bank of Fujairah revealed it had lent $25.4m to the two groups.

Sharjah Islamic Bank said it had lent Dh55.4m to Ahmad Hamad Al Gosaibi and Brothers, adding that it had already taken provisions of up to 50 per cent of that amount. The National Bank of Umm al Qaiwain took provisions of Dh68.5m against the Saudi companies, while First Gulf Bank said it was still determining the value of provisions needed. Abu Dhabi Commercial Bank, the UAE's third-largest lender, said last month it had an exposure of $610m. It has set aside Dh430m in provisions.

Mashreqbank said last month it was owed more than $400m by Al Gosaibi. The financial troubles at Saad Group and Al Gosaibi, Saudi Arabia's largest conglomerates, have shaken the region since the companies began defaulting on their financial obligations in April. Shortly afterwards, Saudi authorities froze the assets of Maan al Sanea, the billionaire owner of the Saad Group. Both groups, which are estimated to owe up to $20 billion to regional and international creditors, have been restructuring their debt.

They are also fighting off legal action by creditors and are being sued by international banks in both New York and London. The Central Bank has asked all UAE banks to take sufficient provisions. The regional fallout from the troubles facing the two groups reached Dubai's financial hub on Wednesday when it emerged that the parent company of Saad's local unit had been placed in voluntary liquidation. The liquidators of LA Investments, a London-based investment vehicle belonging to the Saad Group, said they had advised the Dubai financial regulator that they planned to withdraw the licence of SAAD Financial Advisory Services, a Saad investment unit.

Sultan al Suwaidi, the Governor of the Central Bank, said on Monday that 13 local banks had exposure to the two troubled conglomerates and their affiliates. uharnischfeger@thenational.ae