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115645
Thu, 04/08/2010 - 16:00
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https://oananews.org//node/115645
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Lending by UAE banks to pick up in H2 2010
Abu Dhabi, April 8, 2010 (WAM)- Lending by the UAE banks is expected to pick up in the second half of this year even though it is unlikely to touch boom levels soon, a senior analyst has said.
"Banks are tight on lending as they are focused on asset quality now. They still have limitations on the funding side. It will come back but may not be as aggressive as before.
Lending would be restricted but it will become better by the second half. We expect a pick up for certain sectors," Germaine Benyamin, Senior Analyst, HC Research Department, HC Brokerage, told Emirates Business.
Regarding the Central Bank's plans to ask banks for compulsory general provisioning in the range of 1.25 per cent to two per cent of the loan book, she said the requirement of 1.25 per cent provisioning by Central Bank may lead to provision levels eating up on operating income but many banks in the region have already been cautious and were providing more.
"Many UAE banks have already been providing more than 1.25 per cent towards general provisions, a measure that would help them keep provision levels rise further," she said.
On the plan to reduce the period of payment default to 90 days from 180 days for sub standard loans, she said some banks were yet to do it. "However, in the long run it is good for the banks as it is a buffer," she said. NPLs, for some banks, would double as they did not provide fully for their exposures to troubled Saudi groups.
Default level is also expected to pick up. "From 3.5 per cent in 2009, we are expecting NPLs to touch 5.5 to 6.5 per cent in 2010 for the banks under our coverage," she said.
"Banks are tight on lending as they are focused on asset quality now. They still have limitations on the funding side. It will come back but may not be as aggressive as before.
Lending would be restricted but it will become better by the second half. We expect a pick up for certain sectors," Germaine Benyamin, Senior Analyst, HC Research Department, HC Brokerage, told Emirates Business.
Regarding the Central Bank's plans to ask banks for compulsory general provisioning in the range of 1.25 per cent to two per cent of the loan book, she said the requirement of 1.25 per cent provisioning by Central Bank may lead to provision levels eating up on operating income but many banks in the region have already been cautious and were providing more.
"Many UAE banks have already been providing more than 1.25 per cent towards general provisions, a measure that would help them keep provision levels rise further," she said.
On the plan to reduce the period of payment default to 90 days from 180 days for sub standard loans, she said some banks were yet to do it. "However, in the long run it is good for the banks as it is a buffer," she said. NPLs, for some banks, would double as they did not provide fully for their exposures to troubled Saudi groups.
Default level is also expected to pick up. "From 3.5 per cent in 2009, we are expecting NPLs to touch 5.5 to 6.5 per cent in 2010 for the banks under our coverage," she said.
