Dubai World payment frees funds at Emirates NBD

Emirates NBD’s impaired loans ratio would drop by a quarter if the biggest bank in the UAE reclassifies its loans to Dubai World as performing, according to Arqaam Capital.

The amount of bad loans would improve by 3.6 percentage points to 10.3 per cent if the change was made, Arqaam said yesterday. That would allow funds set aside by the bank to cover 77.9 per cent of bad debts compared with 57.5 per cent today, close to Emirates NBD’s 80 per cent target.

The bank’s loan-loss provision shortfall would decline to Dh600 million from Dh8.1 billion.

Emirates NBD is one of the biggest lenders to Dubai World and other state-controlled entities in the emirate, and was hurt after the global credit crisis forced them to delay debt payments. Dubai World owes the bank Dh9.4bn, against which the bank has set aside Dh458m to cover losses, according to the bank’s quarterly results presentation.

Dubai World, one of the emirate’s three main state-owned holding companies, will be able to repay the Dh16.16bn due to creditors in September next year, said Mohammed Al Shaibani, the director general of the Dubai Ruler’s Court. The amount is part of a deal with about 80 creditors from March 2011 to delay payments on Dh54bn of loans. The remaining balance is due in September 2018.