More firms post portfolio losses

Dubai: The recent market meltdown has resulted in heavy portfolio losses for companies in the Middle East and several UAE companies are also expected to book losses on their portfolios, according to a research report by Credit Suisse.

With equity and credit markets shedding 40-70 per cent of their value around the world (including GCC markets), Credit Suisse has highlighted the stocks that have the largest potential exposure. They include companies that have high mark-to-market investments on their books.

Mark-to-market is an accounting methodology of assigning a value to a position held in a financial instrument based on the current market price for the instrument or similar instruments.

According to the Credit Suisse analysis, several companies including banks such as Mashreq, Emirates NBD and National Bank of Abu Dhabi potentially have mark-to-market investments to tangible equity (tangible equity is total equity minus goodwill and intangible assets) above 100 per cent.

In the UAE, stocks with less than 5 per cent mark- to-market investments to tangible equity ratio, positive debt and over 3 per cent dividend yield are Sorouh Real Estate and Etisalat.

"Among banks, United Arab Bank, National Bank of Umm Al Quwain and Union National Bank have the lowest mark-to-market investments to tangible equity, while Mashreq Bank and Emirates NBD have the highest exposures," Mohammad Hawa, research analyst with Credit Suisse wrote in the report.

According Credit Suisse, banks would have higher exposure. Credit Suisse has screened companies that have the lowest mark-to-market investments as percentage of tangible equity (below 30 per cent), positive cash (cash exceeds total debt), than $2 billion. The list of such companies in the UAE include etisalat, Sorouh Real Estate, First Gulf Bank and Abu Dhabi Islamic Bank.

Several UAE banks' third quarter profits were hurt by write-downs in investments in securities. While Emirates NBD reported Dh273 million worth of write-downs in investment securities due to the global fall in asset prices, National Bank of Fujairah reported a fall of Dh133 million in the third quarter. NBAD had marked down its investment grade portfolio by Dh58 million in the third quarter.