Gcc Weekly Banking Digest-23.07

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    Banking

    DIFC accounts for 1% of UAE's GDP

    Dubai International Financial Centre'ssub-economy contributed about 3.6 percent to the gross domestic product ofDubai while accounting for one per centof the UAE's GDP. The DIFC's GDPgrew 5.2 per cent in 2010 compared to2.77 per cent in 2009. The latest DIFCEconomic Activity Survey places thetotal GDP of the centre's sub-economyat $2.92 billion. This puts DIFC's

    contribution to Dubai's GDP at 3.6 percent of $81.96 billion and its contributionto the UAE economy at 0.97 per cent.

    The economic survey, undertaken bythe DIFC Economics Department, isbased on international best practices innational accounting, and measuresoutput, intermediate consumption andultimately the gross value addedproduced within the DIFC district by

    entities registered in the centre. DIFCreceived 477 respondents to the surveywhich represents nearly 62 per cent ofits client base. "The survey resultsindicate that there was a strongrecovery in economic activities in theDIFC last year compared to 2009. Wehave witnessed the continuation of thisin the first half of 2011," said ChiefEconomist and Head of ExternalRelations of DIFC.

    NBAD issues 10 billion yen Samuraibond

    The National Bank of Abu Dhabi, hasissued its inaugural yen-denominatedsamurai bond, the first ever by a Middle

    Eastern financial institution. NBAD'sissuance of the 15-year, 10 billionJapanese yen (Dh54.7 million) Samuraibond is part of the bank's strategy indiversifying its funding sources and toextend its liability profile. NBAD'ssamurai bond matures in 2026 and hasa fixed coupon rate of 2.6 per cent.Mistubishi UFJ Morgan StanleySecurities and HSBC Securities Japanwere the joint lead managers of the

    bond.

    UAEs non-performing loans to peakabove 10% in 2011

    Non-performing loans (NPLs) of theUAE banks are expected to peak above10 per cent this year up from 8.3 percent in 2010 and 4.9 per cent in 2009,rating agency Moody's said in a reportThursday. Moody's expects the

    upcoming Dubai Holding's $10 billion(Dh36.7 billion) debt restructuring will beone significant contributor to this year'sNPL levels.

    "Dubai-based banks typically have highexposures to Dubai government-relatedentities, and we consequently expectNPLs to peak in 2011 at around 6 percent to 8 per cent in Abu Dhabi and 11per cent to 14 per cent in Dubai," said

    vice-president Senior Credit Officer atMoody's. Despite a projected surge inoverall NPLs for the year, the ratingagency said the UAE benefits from the

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    twin growth engines of Abu Dhabi andDubai.

    Both are showing signs of recovery inkey sectors such as tourism, transport,

    logistics and both benefit from sizeablestate intervention in the economy,particularly support for distressedstrategic and government-relatedcorporates. However, a substantial debtoverhang, corporate leverage, delayedrestructurings and persistent real estateweaknesses after an outsized propertyboom are constraining marketconfidence.

    UAE interbank offered rates at new 7-year low

    Interbank offered rates in the UnitedArab Emirates continued their slide to afresh seven-year low, as liquidity in theOPEC member's banking sector stayedhigh, also dragging one-year dirhamforwards lower. Bank deposits hadrisen to their highest level in at least twoyears in April as the Gulf Arab stateenjoyed a safe-haven status amid

    regional unrest, but dropped againslightly in May.

    "It is the high liquidity and the banksnow falling in line with what is requiredby the central bank. A few of the bankswho have had higher rates have nowbrought the rates in line with the otherbanks which has brought the averagedown," said, head of forex trading forMiddle East and North Africa at

    Standard Chartered in Dubai. "Thebanks are now falling in line with what isrequired by the central bank, which ismaking the three-month EIBOR comeoff quite considerably," he said.

    Asset quality of UAE banks to remainunder pressure

    Asset quality of leading UAE banks willremain under pressure compared totheir regional peers during the current

    year and could linger on into next year,according to banking analyst with CreditSuisse. "UAE banks are yet toexperience the peak in their non-performing loans [NPLs] to 8.4 per cent,on our estimates for 2011 and will haveto adjust to stricter regulatory measuresmainly on consumer lending and fees,"he said in a report.

    The NPL ratio for 6 leading UAE banks

    Credit Suisse covers stood at 7.2 percent and the provision coverage stoodat 51 per cent in 2010. "Given theexposure to Dubai's GREs [governmentrelated entities] and a weak real estatemarket, we expect the NPL ratio forthese banks to continue to rise to 8.4per cent in 2011, while we forecast theprovision coverage to increase to 58 percent," he said.

    DFSA issues warning over website

    The Dubai Financial Services Authority(DFSA) issued an alert to the investorcommunity to false, misleading anddeceptive statements made by acompany named Dubai InvestmentFinancial Capital UAE on their website http://www.difcuae.org/. The websitestates that "Dubai Investment FinancialCapital UAE" is regulated by the DFSA.

    "This statement is incorrect. DubaiInvestment Financial Capital is notregulated by the DFSA, and is notaffiliated with the Dubai InternationalFinancial Centre [DIFC], despite the useof the initials "DIFC" on the website."

    http://www.difcuae.org/http://www.difcuae.org/
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    UAE banks can sail throughdespite challenges

    The UAE banking sector hassurmounted the worst but is anticipated

    to see another difficult year in 2011,Kuwait-based Global Investment Housesaid. Challenges remain but UAE bankshave the ability to sail through, Globalsaid in a report. The return ratios of UAEbanks are on an improving trajectoryand do not justify the low price multiplesthat banking stocks are trading at.

    The investment company said UAEbanks still offer good buyingopportunities. Now that they are more

    capitalized and safer than ever, stillboasting a healthy top-line, achievingdecent loan growth, exhibiting lowerprovisions and higher profits, UAEbanks have the ability to maneuver pastrough tides. Globals investmentadvisory said it strongly believed that arare second chance to reap thebenefits is in the offing and that strongfundamentals should not be overlooked.

    UAE outpaces GCC in remittancegrowth

    Remittances by the UAE-based migrantworkers grew 11 per cent in 2010, at afaster pace compared to the 6.1 percent surge in the amount remitted byexpatriates across the GCC. Moneyremitted by foreign workers in the UAErose to $10.54 billion in 2010 from $9.51billion in 2009, a clear indication thatafter a protracted downturn and a slump

    in job market during 2008 and 2009, thecountrys economy had returned to arecovery mode, chief operating officer ofUAE Exchange Centre, said.

    He said even the uptick in the GCCremittance market in comparison to the

    global figures reflects the resilience ofthe region in the wake of increasedinvestments in development projects.With the exception of the constructionrelated sectors, UAEs traditional

    industries including trade, hospitalityand tourism have shown robust growthto underpin the migrant job market, hesaid.

    Total expatriate workers remittancesfrom the GCC rose to $63.75 billion in2010 from $60.03 billion in the previousyear, up 6.1 per cent compared to anupturn of 2.44 per cent in worldwideremittances that, according the WorldBank, reached $325 billion from $317.23

    billion in 2009. The InternationalMonetary Fund, or IMF, predicted thatoutward remittances from the GCC,which has over 12 million expatriatesand is the second largest source ofprivate financial transfers, second onlyto the US, are estimated to reach $74.9billion in 2011 on the back of an all-around growth fuelled by higher oilrevenues. A World Bank forecast saysthat the total amount of remittance to

    developing nations will continue toincrease in the coming years with agrowth of about 6.2 per cent in 2011 and8.1 per cent in 2012.

    DIFC registered 64 new companies inthe first half of 2011

    The Dubai International Financial Centre(DIFC) reported that 64 new companiesstarted operation in the first six monthsof 2011 taking the total of active

    registered companies operating in theCentre up to 813. While 44 per cent ofnew regulated companies that joined theDIFC in the first half of 2011 came fromthe Middle East and Asia, 50 per centwere from Europe and North America,

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    and 6 per cent from the rest of theworld.

    DIFC management said that in spite ofthe regional unrest and the continuedglobal economic downturn, DIFC

    continues to grow as one of world's topinternational financial centres. As ofJune 31, 2011, 813 active registeredcompanies have a presence in DIFCcompared to 792 in 2010, with 312regulated and 409 non-regulatedcompanies, and 92 retailers.

    Saudi banking net profits up 10%

    Saudi banks posted an increase of 10per cent in net profits during the first halfof 2011, reaching 16 billion Saudi riyals(Dh15.66 billion) against 14.4 billionriyals during the same period last year.All Saudi local banks, except Samba,have registered an increase in netprofits during the period. Samba's netprofit fell by 8 per cent. The SaudiInvestment Bank recorded the highestgrowth reaching 867 per cent while thelowest growth registered by SaudiFransi Bank, with one per cent.

    Credit picks up for Oman andBahrain

    Standard & Poor's has removed Bahrainand Oman from negative credit watch asthe political climate in both countriescontinues to improve. Bahrain's longand short-term local and foreigncurrency sovereign credit ratings wereaffirmed at "BBB/A-3" with negativeimplications, S&P said.

    It also affirmed Oman's "A/A-1" long andshort-term local and foreign currencyratings. About Bahrain, S&P said: "Weare removing the ratings fromCreditWatch because of the diminished

    near-term political tensions and ourexpectation that increased publicspending will lift economic growth nextyear, while fiscal implications will bebuffered by the GCC support package."

    It said Oman had also benefited from aneasing of political pressures. "Asidefrom an isolated killing in Sohar, theprotests were largely peaceful, and thequick response of Sultan Qaboos binSaid Al Said to protester demandsappears to have eased tensions," S&Psaid.

    Qatar central bank restrictions take atoll

    The central bank released a circular inApril placing a ceiling of 400,000 Qataririals on personal loans to expatriates,and dropping the loan limit for Qatarinationals to 2 million rials from 2.5mrials. The circular also capped theinterest rate on all personal loans at 6.5per cent, compared with current rates ofup to 10 per cent.

    That move followed the central bank's

    order in February that all commercialbanks shut down their Islamic financeoperations by the end of the year, whichwas seen as likely to boost Islamiclenders in the Gulf state.

    New Product/services

    DGCX to launch Indian RupeeOptions Contract

    The Dubai Gold and Commodities

    Exchange (DGCX) is set to expand itsIndian Rupee (INR) product offering withthe launch of an INR Options Contracton September 26, 2011. The contractwill be the only exchange-traded INROptions product offered to markets

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    outside India. The provision of anIndian Rupee Options contract willenable us to build on the exceptionalvolume growth achieved by our IndianRupee futures contract over the last 12

    months and meet member demand tofurther strengthen our INR offering,CEO of DGCX, said.

    Standard Charted home loan @4.99%

    Slowly the market for the housing loansis becoming extremely competitive.House prices have reached historicbottom levels which has also increasingthe risk appetite of the lenders.

    Standard Charted has further reducedthe rates to 4.99% one of the lowest inthe industry. It has extended themaximum period to 30 years, amountupto AED 18 Mn with 0% processingfee.

    HSBC offers yuan accounts in UAE

    HSBC has started offering dedicatedyuan accounts (RMB accounts) atHSBC branches throughout the UAE,

    the bank said. This move means thatUAE-based customers will be able totrade with China, subject to People'sBank of China rules, and receive aswell as pay in yuan without having toconvert their currency exposure, helpingthem lower their trading costs, reduceforeign exchange risk and strengthentheir relationships with Chinesepartners.

    "Our trade research tells us that theyuan has already overtaken the poundin its use as a settlement currency andtraders are telling us that they expect itbe one of their top 3 settlementcurrencies this year. And, as trade withAsia increases, so does global interest

    in this important currency," said Head ofCommercial Banking for the UAE.

    Tamweel offers up to Dh5m loans tooverseas home buyers

    Tamweel, the Dubai-based Islamicmortgage lender, has entered the non-resident home loan market with thelaunch of two new financing products.The move, which makes Tamweel thefirst UAE lender to tap into overseasproperty investors, comes a month afterthe Government announced a newthree-year visa scheme to overseasbuyers of homes worth more than Dh1million in the UAE.

    Previously, non-resident home buyers ofproperties in the Emirates received six-month visas. Under Tamweel's non-residence programme, overseasproperty buyers will be able to borrowup to Dh5m for completed residentialproperties in Abu Dhabi and Dubai, withrepayment tenure of up to 25 years.Tamweel has also launched a homerefinance programme, which allowsowners of fully paid properties to unlock

    up to 50 per cent of the value of theirhomes.

    Ajman Bank launches RoadmilesCredit Cards

    Ajman Bank launched its first loyaltyprogramme in the UAE via newRoadmiles Credit Cards. Roadmiles,which is available with Classic,Premium, and Platinum Credit Cards, isthe where points can be redeemed forfuel. Ajman Bank Credit Cardholdersearn one Roadmile for every dirhamspent on their Card. AccumulatedRoadmiles can be redeemed for FuelCards to be used for free fuel at petrolstations across the UAE.

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    ARRA, Ajman Bank partner to boostreal estate sector

    Ajman Real Estate Regulatory Agency(ARRA) and Ajman Bank announced apackage of products designed to boost

    the real estate sector in Ajman. Theagreement is the latest output from theongoing cooperation pact signedbetween the two organisations late 2010to offer real estate financing to endusers purchasing properties in Ajman.

    Through the agreement, Ajman Bankwill now offer up to 70 per cent finance-to-value for select projects registeredwith ARRA. Furthermore, Ajman Bank

    will reduce arrangement fees for endusers purchasing properties in Ajman.Financing solutions, for up to AED 1million and tenure of 15 years areavailable to UAE Nationals, GCCcitizens and expatriate residents.

    Emirates NBD ATMs get DCC service

    Emirates NBD, and its subsidiaryNetwork International announced, thatall its ATM machines in the UAE have

    been enabled with the DynamicCurrency Conversion, or DCC service,to reflect the amount in the cardholdersbilling currency for foreign credit cards.Customers using an Emirates NBD ATMto withdraw money will find that theamount withdrawn in UAE Dirhams willbe automatically converted into theirbilling currency, in the statementgenerated by the issuer of the card. TheDCC service provides greater clarity and

    convenience to cardholders with foreigncredit cards.

    Compiled byRisk Management Department

    Bank of Baroda, Dubai,UAE

    DisclaimerThe news items have been compiled from different newspapers and from their websites

    and do not necessarily reflect the views of the Bank of Baroda. Nothing contained in this

    publication shall constitute or be deemed to constitute an offer to sell/purchase or as an

    invitation or solicitation to do so for any se curities of any entity. Bank of Baroda and / or

    its affiliates and its subsidiaries make no representation as to the accuracy;

    completeness or reliability of any information contained herein or otherwise provided

    and hereby disclaim any liability with regard to the same.