Bank provisions up 73% in 12 months
Specific provisions for non-performing loans (NPLs) by banks in the UAE have gone up by 63.7 per cent in the past 12 months, to Dh33.4 billion at the end of January 2010 from Dh20.4bn at the end of January 2009, according to data published yesterday by the Central Bank.
General provisions, on the other hand, are up 106.7 per cent, from Dh6bn to Dh12.4bn for the same period, taking the total provisioning by UAE banks up 73.48 per cent to Dh45.8bn at the end of January 2010, compared with Dh26.4bn in the corresponding period last year.
Banks have been consistently raising their provisioning levels over the past 12 months in accordance with the Central Bank's instructions, which has mandated all banks to book at least 50 per cent of their funded and unfunded loans exposure to the two Saudi Arabia-based family-owned conglomerates, Saad and Algosaibi Groups, as provisions in their 2009 results.
The Central Bank has also mandated that banks book 100 per cent of their exposure to Algosaibi Group subsidiary The International Banking Corporation, as well as Saad Group subsidiary Awal Bank as provisions.
In a note issued in November, the Central Bank reckoned that the funded and unfunded exposure of the 20 banks (13 national banks and seven foreign bank branches operating in the UAE) to the two Saudi groups and their subsidiaries was $2.9bn (Dh10.6bn).
"Although these provisions are considered substantial, the expected profits of all banks in the UAE, after deducting such provisions, may reach Dh20bn at the end of 2009, compared to profits of Dh26.8bn during 2008," the Central Bank had reckoned in its note at that time.
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