Dubai: Strong performance of the UAE’s banking sector is a reflection of the UAE economy, Abdul Aziz Al Ghurair, CEO of Mashreq told Gulf News on Sunday after Mashreq group reported a 33 per cent growth in the net profit in 2014.
“Our growth is a reflection of the overall growth in the economy where we operate. If the economy continues to grow we will continue to report strong results,” he said.
Mashreq’s CEO believes that the impact of oil prices on the economy will not be as dramatic as the global financial crisis. He expects some impact as already seen in terms of corrections in the public equity markets and some amount of stabilisation in real estate prices.
“What we understand currently is that the oil prices will have only limited impact on the economy. I don’t see mass exodus of people or companies reducing their staff causing the kind of panic we saw 5-6 years ago during the financial crisis. We have been watching the consumer spend during the last two months, and we haven’t seen any dramatic decline,” said Al Ghurair.
Despite the subdued risks in short term, Al Ghurair said banks should watch out for risks originating from bank customers from countries that are highly dependent on oil.
“Some of or trade partner countries are heavily dependent on oil. Banks [with] customers who deal with these countries that are directly impacted by the oil prices need to be cautious. We will have to revisit lines of credit to these customers,” he said.
Clearly, decline in oil prices has benefited some countries that are the UAE’s trade partners which he thinks will compensate for some business losses.
Unlike during the global financial crisis, Al Ghurair do not expect to see a spike in non-performing loans of banks as a result of the decline in oil prices. “Banks are a lot more careful, a lot more prudent,” he said.
Government spending
Al Ghurair does not expect to see any big scaling back of government spending in the near future. “I don’t think there will be any immediate impact on the government spending plans. If [at all] there is an impact it will happen only over a longer period depending of the direction of the oil prices. I don’t think any spending cuts will be visible in 2015,” he said.
The UAE’s banking sector credit growth is expected to be about 10 per cent this year. “I think 10 per cent is a healthy loan growth rate for the banking sector and the economy and I expect the banking sector to maintain this growth levels in 2015,” he said
“The full implementation of a credit bureau is expected to stabilise bank lending, especially the personal lending business. The credit bureau is being implemented with our full support and we want to use their services to improve the overall quality of assets and it is good for the customers as well. Of course, in the first 6 to 12 months there will be some shrinkage in the retail borrowing because we may discover that certain customers are over leveraged,” he said.
