Abu Dhabi: Abu Dhabi Commercial Bank (ADCB) said on Thursday its exposure to the troubled Saudi business groups Saad and Algosaibi should not raise "significant concerns for investors".
"[A] large percentage of these exposures is covered by cash collateral. ADCB holds other good security, ADCB has taken high and prudent provisions against such losses and there's a low probability of complete loss," the bank told the Abu Dhabi Securities Exchange (ADX), where it is listed.
"Large exposures to specific troubled financial institutions should not automatically be assumed to result in a full loss or write-off of the said exposure," ADCB said.
Saad Group, a $30 billion (Dh110 billion) empire chaired by billionaire Maan Al Sanea, is restructuring its debt, including that of its Bahrain-based subsidiary Awal Bank, after ratings agencies downgraded the group to default status.
Saudi group Ahmad Hamad Algosaibi Group & Brothers (AHAB), which owns a majority stake in Bahrain-based The International Banking Corporation (TIBC), is also restructuring its debt. Investors have been kept guessing by both groups, who have released little information on debt restructuring.
ADCB declined to comment on the magnitude of its exposure to the two business groups. However, an international media report, quoting a banking source said recently that ADCB's exposure to the Saudi businesses "could be easily over $500 million".
"The bank said it maintains, as per its disclosed financial statements at the end of March this year, Dh1.075 billion in provisions classified as 'Portfolio Impairment Provisions'.
"Such large provisions, representing 0.95 per cent of gross loans and advances, have been adequately and prudently taken to help the bank maintain/go through any unforeseen circumstances, particularly losses resulting from customer defaults," said ADCB.
ADCB's chief executive officer Ala'a Eraiqat, in a separate statement to ADX said the bank is in "close contact with the relevant customers and is working with their financial advisers and the rest of the lenders for a speedy resolution."
First Gulf Bank, which reportedly has "a small amount of exposure" to the two Saudi business groups told the stock market in a statement: "The exposure of FGB to Algosaibi and Saad Groups is not material to be commented on separately. FGB remains committed to all its stakeholders."
ADCB's shares fell 4.07 per cent yesterday to close at Dh1.60. FGB rose marginally, closing at Dh13.10 per share.