Bad loans at #UAE banks likely to increase once relief measures are over - S&P | ZAWYA MENA Edition

Bad loans at UAE banks likely to increase once relief measures are over - S&P  | ZAWYA MENA Edition

Problem loans at banks in the UAE are likely to increase further once borrower support measures are lifted, S&P Global Ratings said on Sunday.

The ratings agency has also given the local banks a group “5” classification under its latest Banking Industry Country Risk Assessment (BICRA), similar to other countries like Qatar, Mexico, Philippines, Italy, Panama, Peru, Malta, Iceland, Hungary and Bermuda.

In its latest report, S&P said the trend in the UAE’s economic risk is stable. However, it said that the local banking system has weakening asset quality and significant exposure to risky factors, while profitability “will remain lower for longer”.

The country’s real estate is also expected to remain under pressure for at least another 12 months due to oversupply, while the tourism, hospitality, aviation and some trading sectors will continue to be hampered by low demand.

“The COVID-19 pandemic, lower oil prices and continued pressure on the real estate sector have increased risks for UAE banks, and we expect banking sector’s problem loans to increase further once the regulatory forbearance measures are lifted and banks start to account for the impact of the economic shock,” S&P said.