#UAE banks resilient despite $91bln property exposure | ZAWYA MENA Edition

UAE banks resilient despite $91bln property exposure | ZAWYA MENA Edition:

All rated UAE banks are poised to maintain stable credit profiles in 2020, barring any unexpected increase in geopolitical risk or a major fall in oil prices, thanks to their resilient financial performance, analysts at S&P Global Ratings said. Asset-quality indicators of the banks also remain buoyant despite a more than 35 per cent decline in real estate prices since mid-year 2014 and banks' somewhat large real estate exposure, the ratings agency said. The real estate exposure of UAE banks is about 20 per cent of total lending or Dh 333 billion as of September 30.

"If the real estate correction is not followed by a stabilisation of prices in the next 24 months, we might see a bigger effect on banks' asset quality. Overall, we expect banks' cost of risk to increase slightly in 2020 to about 120 bps, compared with 110 bps in 2019. Banks in the UAE are now in a better position than the 2009-2010 crisis, because they have built sufficient loan-loss reserves since then," S&P Global Ratings said.

In 2019, despite geopolitical headwinds, all leading banks in the UAE recorded robust performances, with Emirates NBD, Dubai's largest bank, posting a 44 per cent jump in net profit at Dh14.5 billion, up from the Dh10 billion in 2018. First Abu Dhabi Bank, UAE's top lender, announced a modest four per cent increase in net profit to $3.4 billion compared to $3.27 billion in 2018.