Overexposure to the "highly speculative" real estate sector and highly leveraged companies has eroded asset quality of UAE banks, and the percentage of bad loans on the country's banks' books could go up to as much as 10 per cent, according to the Washington-based Institute of International Finance (IIF).
The ratio of non-performing loans (NPLs) to total loans has almost doubled from 2008 to 2009 in Kuwait and the UAE, and is expected to increase further this year, the IIF maintains in its regional overview of the GCC economies.
The institute reckons that the UAE's NPL ratio, which was at 2.5 per cent in 2008, surged to 4.8 per cent in 2009 and is forecast to reach 8.2 per cent by the end of this year. It could rise even further next year but are likely to remain below 10 per cent, according to Dr Garbis Iradian, Deputy Director (Africa/ME Department) with the IIF, and co-author of the report.
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