ENBD expects write-downs
Emirates NBD (ENBD) expects more write-downs due to US sub-prime crisis this year. The bank had announced write-downs of $10 million (Dh36.7m) as direct exposure to the credit crunch last year.
Sanjay Uppal, ENBD Chief Financial Officer, said: "We all saw how the global financial sector showed further write-downs during the last two quarters. Yes, ENBD will have more indirect write-downs by the end of the year from market-to-market operations.
"We are monitoring the process very closely. But any new write-downs will not affect our results or balance sheet because our exposure to the sub-prime is very limited compared to the huge size of the crisis," he said.
In a financial report released yesterday, Trowers & Hamlin said: "A few banks in the region have taken sub-prime write-downs."
Uppal did not elaborate on the estimates of the projected write-downs, but stressed that ENBD would continue to outperform the banking sector in terms of profits until the end of the year. He said the projected growth would be in the range of 35-40 per cent.
Emirates NBD achieved 45 per cent growth in profits during the second quarter of 2008.
Uppal's announcement on the possible further write-downs came in line with several recent warnings that the UAE banks may be far more exposed to potential sub-prime mortgage losses than previously forecast.
Earlier this year, HSBC predicted that UAE banks would suffer more sub-prime losses due to their global liabilities from structured investments which are estimated at more than $200 billion.
According to a recent report by Fitch Ratings, global banks have already written down more than 80 per cent of their losses from sub-prime mortgage assets. The agency estimated total losses from sub-prime mortgage assets at $400bn, but it also added that the losses could surge to a total of $550bn.
It said that banks were holding around 50 per cent of these losses, $200bn to $275bn, with the remainder held by financial guarantors, insurance firms, asset managers and hedge funds.