Mashreqbank and Abu Dhabi Islamic Bank (ADIB), two of the country's largest lenders, have reported sharply lower second-quarter profits as they set aside provisions for bad loans and warned of more to come. The results continue a trend marked by high provisions, slow lending growth and flat revenues, all of which are lowering profits.
But analysts welcomed banks taking a cautious approach during the financial crisis. Tirad Mahmoud, the ADIB chief executive, warned the bank would set aside more provisions in the future and continue its "conservative approach". "The credit environment remains weak and we expect the rest of this year to remain challenging, with further provisioning necessary," Mr Mahmoud said. Mashreqbank, based in Dubai, saw its second-quarter net profit fall by 38.5 per cent to Dh435 million (US$118.4m), compared with the second quarter last year, as it set aside Dh319m in provisions.
ADIB said second-quarter profits fell 30 per cent to Dh193.4 million from the same period last year as it set aside Dh171.4m in provisions against credit losses. Pointing to a rise in distressed loans, ADIB said it was "actively engaged with our clients who have been impacted by the current economic conditions and are working with them to develop solutions that will enable them to meet their commitments".
Neither of the banks revealed data on non-performing loans (NPLs), which has become a key measure as lenders adjust to leaner times. "NPLs are the most important information and allow us to assess the loan quality," said Sofia el Boury, a banking analyst at Shuaa Capital. Earlier this week, Emirates NBD warned that NPLs could rise to 2.5 per cent next year from the present 1.56 per cent. Economic woes have forced banks across the globe to set aside large amounts of money to prepare for defaults.
On Monday, Deutsche Bank, one of Europe's largest lenders, increased its provisions against loan losses to ?1bn (Dh5.2bn), twice the amount of the first quarter and equivalent to all its provisions for last year. The IMF warned this week that 14 per cent of US loan books would go sour, while 7 per cent of loans in Europe would be lost. With the exception of the Bank of Ajman, all publicly traded banks in the UAE have now reported second-quarter results.
The banks have booked a total of Dh5.2bn in second-quarter profits, down 26.8 per cent from the second quarter of last year, when they made Dh7.1bn. Abdul Aziz al Ghurair, the Mashreqbank chief executive, said his bank's provisions were "key to ensuring that the bank operates in a sustainable manner while the ups and downs of the current crisis play out". At least 12 UAE banks are owed money by two huge Saudi conglomerates - the Saad Group and Ahmad Hamad Al Gosaibi and Brothers - which have defaulted on their loans and are undergoing sweeping debt restructurings.
Precise figures have yet to emerge but the conglomerates are estimated to owe banks tens of billions of dollars that they may be incapable of repaying. Against that backdrop, banks in the UAE have so far reported more than Dh4.4bn in provisions against bad loans in the first half of this year. Emirates NBD, the country's largest bank by assets, said it had taken Dh1.6bn in provisions in the half. Abu Dhabi Commercial Bank took Dh890m in provisions, and First Gulf Bank in Abu Dhabi took Dh480m.
When Abu Dhabi Islamic Bank reported its results yesterday, it revealed Dh264.4m in provisions during the first half of the year. The bank is owed an estimated Dh146.9m as its share of a syndicated loan to Awal Bank, a Saad Group subsidiary, according to a document circulating among bankers. It is also owed Dh245m it lent Saad to finance an investment in Makhazen Industrial Investments, a warehousing company in Abu Dhabi that never got off the ground.
Mashreqbank also reported Dh319m in loan provisions for the quarter. The bank has given several loans to the Saad and Al Gosaibi groups and their subsidiaries. The bank is involved in court disputes in the US in which it is alleging Al Gosaibi failed to keep its end of a currency swap agreement, leaving the bank with a loss of $150m. @Email:uharnischfeger@thenational.ae
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
APPLE IPAD MINI (A17 PRO)
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Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
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Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4
Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
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In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
Best Foreign Language Film nominees
Capernaum (Lebanon)
Cold War (Poland)
Never Look Away (Germany)
Roma (Mexico)
Shoplifters (Japan)
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
It
Director: Andres Muschietti
Starring: Bill Skarsgard, Jaeden Lieberher, Sophia Lillis, Chosen Jacobs, Jeremy Ray Taylor
Three stars
PAST 10 BRITISH GRAND PRIX WINNERS
2016 - Lewis Hamilton (Mercedes-GP)
2015 - Lewis Hamilton (Mercedes-GP)
2014 - Lewis Hamilton (Mercedes-GP)
2013 - Nico Rosberg (Mercedes-GP)
2012 - Mark Webber (Red Bull Racing)
2011 - Fernando Alonso (Ferrari)
2010 - Mark Webber (Red Bull Racing)
2009 - Sebastian Vettel (Red Bull Racing)
2008 - Lewis Hamilton (McLaren)
2007 - Kimi Raikkonen (Ferrari)
If you go
The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.
The rooms
Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
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Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
COMPANY PROFILE
Name: Grubtech
Founders: Mohamed Al Fayed and Mohammed Hammedi
Launched: October 2019
Employees: 50
Financing stage: Seed round (raised $2 million)
Dr Amal Khalid Alias revealed a recent case of a woman with daughters, who specifically wanted a boy.
A semen analysis of the father showed abnormal sperm so the couple required IVF.
Out of 21 eggs collected, six were unused leaving 15 suitable for IVF.
A specific procedure was used, called intracytoplasmic sperm injection where a single sperm cell is inserted into the egg.
On day three of the process, 14 embryos were biopsied for gender selection.
The next day, a pre-implantation genetic report revealed four normal male embryos, three female and seven abnormal samples.
Day five of the treatment saw two male embryos transferred to the patient.
The woman recorded a positive pregnancy test two weeks later.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Company%20profile
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COMPANY%20PROFILE%20
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3EAlmouneer%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202017%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Dr%20Noha%20Khater%20and%20Rania%20Kadry%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EEgypt%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%20%3C%2Fstrong%3E120%3Cbr%3E%3Cstrong%3EInvestment%3A%20%3C%2Fstrong%3EBootstrapped%2C%20with%20support%20from%20Insead%20and%20Egyptian%20government%2C%20seed%20round%20of%20%3Cbr%3E%243.6%20million%20led%20by%20Global%20Ventures%3Cbr%3E%3C%2Fp%3E%0A
Arsenal's pre-season fixtures
Thursday Beat Sydney 2-0 in Sydney
Saturday v Western Sydney Wanderers in Sydney
Wednesday v Bayern Munich in Shanghai
July 22 v Chelsea in Beijing
July 29 v Benfica in London
July 30 v Sevilla in London
