Comment: The curious case of UAE banks

What’s going on at the banks in the United Arab Emirates? It is an open secret that the deterioration in their asset quality is worse than suggested by the size of problem loans, which credit rating agency Moody’s puts at 4.9 per cent of total loans at the end of last year.

Dubai has been through a devastating crisis. The emirate’s property crash has wiped 50 per cent off values, while in nearby Abu Dhabi the market is down by 30 per cent. Economists expect property prices to fall some more, perhaps even as much as 20 per cent.

Many companies in the region are suffering and few are able to secure new credit lines. It has not gone without notice, moreover, that the non-performing loan to gross loan ratio reported by HSBC Bank Middle East was 7.3 per cent – a “better indication” of reality, according to Fitch Ratings.