Bankers see challenges ahead

Dubai: UAE bankers see a challenging year ahead amid uncertain prospects after years of strong business activity.

At a gathering of bankers in Dubai, Sulaiman Al Mazroui, general manager of marketing and corporate communications at Emirates NBD, lightheartedly wondered what kind of year-end bonuses bankers should expect.

However, that did not mask the more somber realities that the global economic slowdown is spreading and its effects on the Gulf region are becoming pronounced.

Phenomenal loan growth thanks to the until-recently booming construction sector and investment activities had kept banks in the country busy.

The financial industry worldwide has taken a hit, with job losses in banks and brokerages reaching more than 300,000. But Gulf-based banks have escaped the serious troubles that have gripped their Western counterparts.

While pointing out that the UAE economy is strong enough to face the tough times, Al Mazroui acknowledged that "2009 is going to be full of challenges for us bankers".

The sentiment is widespread in the local financial community. Many foreign and local financial firms that had ambitious growth plans are now taking a wait-and-watch approach.

Abdullah Al Gobash, regional manager of National Bank of Abu Dhabi (NBAD), said: "I think 2009 will be year of maintaining the achievements of 2008."

The Federal Government support for UAE banks in the form of liquidity injections and deposit guarantees has provided a major confidence boost to the sector. "UAE banks are the strongest in the region. We are not worried about our banking system," Al Gobash said.

While the banking community does not fear any systemic shock, the bullishness in offering credit and services appears to be a thing of the past. Many local banks have tightened conditions for consumer loans in vital segments such as property and automobiles.

Although banks insist last year was good for their business, in the second half they were bedeviled with a host of problems resulting from the credit crisis.

A big chunk of the loan portfolio of most banks is exposed to the real estate sector, which appears in distress. This was cited as one of the reasons for the sharp declines in banking shares last year.

"We have seen healthy loan growth in the past two-three years and taking a breather is in-line. Loans and deposit growth should slow and funding costs will be higher. In addition to drop in customer deposit growth, increased funding costs will have an impact on profitability,"

Deepak Tolani, senior associate of equity research at Al Mal Capital, told Gulf News recently in response to a question about the outlook for UAE banks in 2009.

However, he noted that core business operations continue to perform well.

Do you think banks will be able to successfully cope with challenges in 2009? How confident are you about your bank and its resilience?

Banks in the UAE will gain momentum in a couple of months and even at present are not as affected as other banks all over the world.Lending still continues and the loan repayment policies are quite flexible. Gulf Banks are very resilient and will spring back in action soon.
Naina Nair
Sharjah,UAE
Posted: January 18, 2009, 15:03

The UAE Banks are looking healthy even though the world is experiencing a credit cranch. The timely decition taken by the leaders in support of the local banks and the guarntee of the depositor's funds, brough the confidence of the people. UAE will be back in business again as people think. it will take couple of months only.
Ashraf Ali Arman
Dubai,UAE
Posted: January 18, 2009, 12:14

Banks would obviously come under a lot of stress because of global financial melt-down which has its effects like a virus
Sohail Gill
Dubai,UAE
Posted: January 18, 2009, 11:30

Banks in UAE will definitely get a hit courtesy mortgage loans granted in last 2-3 years to garner short term processing fees and to catch up with the competing banks assets portfolios. However, 20-30 per cent down payment cushion that most of the lenders adopted may support the banks provided prices don't slide beyond this and there are buyers in case of fore-closure.
Bashart
Riyadh,Saudi Arabia
Posted: January 18, 2009, 11:16