Four UAE banks have Dh2.42bn exposure to two Saudi groups

Four of the 14 banks traded on the Abu Dhabi Securities Exchange (ADX) have a Dh2.42 billion exposure to the troubled Saudi Saad and Algosaibi groups.

Three banks yesterday told ADX they have a total exposure of Dh180.6 million to the two groups.

Abu Dhabi Commercial Bank (ADCB), in its global medium term note programme prospectus published on September 17, said it held a Dh1.487bn in exposure to Saad Group and Dh751m to Algosaibi.

Five ADX-listed banks said they had no exposure to these groups while First Gulf Bank said it was co-ordinating with external auditors and the UAE Central Bank on the exposures. National Bank of Umm Al Quwain (NBQ) did not provide a specific exposure amount but said it had created provisions "exceeding the requirements".

ADX on Tuesday asked all listed banks through a circular to provide details of exposure and provisions to the Saudi groups. Terming the communication to the banks "part of the routine process", an ADX spokesperson told Emirates Business: "ADX can confirm a communication was issued to some listed companies as part of a routine process. It should be appreciated that companies disclose information on a regular basis and will continue to do this as the need arises."

The communication, coming as it does just as the third quarter ends, evoked a flurry of responses.

Analysts said it was a welcome step and would encourage more transparency.

The second quarter saw banks net earnings affected by heavy provisioning, but without details of the Saudi exposure. This led to speculation in the market.

"Moves by the UAE banks to be more transparent over exposure to bad loans can only be a good thing as facts are much better for investors to work with than guesswork and as such full disclosure would draw a line in the sand," said Mathew Wakeman, Managing Director for Cash and Equity-linked Trading at investment bank EFG-Hermes.

Robert Thursfield, Director, Financial Institutions, Fitch Ratings, said: "Anything that increases transparency about the banks' exposures to these two groups should be welcomed. Apart from disclosures of each bank's exposure, it would be useful to know the extent of related impairment charges to date."

Bank of Sharjah, Commercial Bank International, RAK Bank, Invest Bank and United Arab Bank said they had no exposure to the Saad and Algosaibi groups.

NBQ said it has increased provisioning to Dh68.5m in its financial statements for the first half of 2009 from Dh21.47m in 2008.

"The bank has expanded its provisions more than the requirements of the Central Bank as a precaution to its limited exposure."

First Gulf Bank said it was co-ordinating with external auditors and the Central Bank regarding its exposure to the troubled Saudi groups.

Sharjah Islamic Bank said it had no exposure to the Saad Group but Dh55m to the Algosaibi Group. The bank created provisioning to the tune of Dh27.7m.

National Bank of Abu Dhabi disclosed that its total exposure to the two groups was Dh32m, including Dh27.5m to the Algosaibi group.

National Bank of Fujairah said it had an exposure of Dh37.64m to Algosaibi and Dh55.78m to Awal Bank, a total of Dh93.39m.


Adib refuses to disclose details

Abu Dhabi Islamic Bank yesterday declined to disclose to ADX the magnitude of its exposure to the troubled Saudi groups. In its reply to ADX, it said it had maintained Dh836 million as provisions in its disclosed financial statements as on June 30, 2009, and these represented 2.18 per cent of the gross customer financing portfolio.

While it said it would continue to "take prudent provisions to maintain its balance sheet strength", the bank also said it "declines to comment on the nature or magnitude of any exposure to any particular client".

"Adib respects client relationship confidentiality and is legally restricted from making client specific comments to the public," Tirad Mahmoud, CEO, ADIB, said in the response to ADX circular.


Dubai too seeks disclosure

The Dubai Financial Market yesterday followed the example of ADX and "formally requested" banks listed on the bourse to disclose their exposure to the Saad and Algosaibi groups in response to a Securities and Commodities Authority (SCA) circular.

"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. Generally, banks disclose in detail their exposure and provisions through quarterly and annual statements. Consequently, Dubai Financial Market would like to emphasise that listed banks have to announce the provisions taken, if any, due to extending facilities to the two Saudi groups in their Q3-09 financial statements," the exchange said in a statement.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.