Fear of more bad loans keeps banks risk-averse
2010-08-09 01:29:05

Dubai: Loan growth has been negligible across UAE banks in the second quarter of 2010 as fear of mounting non-performing loans kept banks risk-averse and earnings took a beating as provisions climbed.
The overall loan growth across the banking sector was 0.8 per cent in the first half of this year compared to an average growth of 1.5 per cent in the first half of 2009 and 24 per cent in the same period in 2008. Analysts and bankers expect loan growth to remain low as banks are focusing more on balance sheet repair.
"We expect loan growth to remain under pressure for the rest of the year. The slow recovery of private sector credit growth in the first half of 2010 is one of the key factors undermining the UAE's economic recovery. We believe much of the risk aversion on the part of banks stems from uncertainty about potential future losses and write-downs," said Sofia Boury, a banking analyst at Shuaa Capital.
Most leading banks reported declines in profit growth in the first half of this year. The earnings were impacted by the virtual stagnation of balance sheet growth and substantial write-downs on loans and investment impairments.

source: Gulfnews

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