UAE banking sector profits may fall between 10 and 20 per cent this year versus 2015 as a slowing economy takes its toll on loan growth, an escalation in levels of bad debt and a rise in expenses amid a spate of new regulations that are forcing lenders to keep more cash at hand, according to Abdul Aziz Al Ghurair.
But on the flip side, the worst is behind the sector in terms of money needed to be set aside for loans gone sour and next year banks will probably report flat profit growth, said Mr Al Ghurair, who is the head of the UAE Banks Federation and also the chief executive of Mashreq.
“The economy has slowed down, there is slowdown in tourism, slowdown in trade among our trade partners. Last year we worked with it but it has shown the impact,” Mr Al Ghurair said.
“It’s also been reflected on the banking industry and it has slowed down and this year you’ve seen anything between 10 per cent to 20 per cent, depending on the bank. Next year, I think it will be similar to this year, plus or minus 5 per cent.”
Those effects can already be seen in the latest quarterly results of banks where provisions have been rising, putting a damper on profits. UAE banks have not been having the best of times since the price of oil began its long descent during the summer of 2014. Deposits have dwindled as government-related entities withdrew funds to help fill a growing budget deficit. Among the hardest hit have been small and medium-sized businesses. The executive said, however, that the industry would face other challenges in the coming years, including increased costs for having to keep higher reserves and a fixed percentage of provisions for all debt – costs he said that would most likely be passed on to customers.
In a wide-ranging media conference in Dubai that lasted an hour and a half, Mr Al Ghurair said that a previously announced Dh7 billion bailout initiative for businesses facing bankruptcy included Dh4.5bn of debt held by small and medium-sized enterprises. That latter figure had not been previously disclosed. Mr Al Ghurair said, however, that the pace of bad debt growth among small businesses had slowed, echoing a number of other senior executives who are reporting the same trend.
The head of commercial banking at National Bank of Abu Dhabi said last week at an SME forum in Dubai that the fallout from the SME debt crisis has abated, but many owners are still facing difficulties repaying lenders following the crash in commodity prices.
Continuing on the subject of small businesses, Mr Al Ghurair said that the recently passed bankruptcy law – expected to boost entrepreneurial appetite – will probably take effect some time early next year with court-appointed committees set to restructure businesses gone awry.
The lack of insolvency regulations during Dubai’s credit crisis between 2009 and 2010 led to a number of businessmen being detained for unpaid debts, with many fleeing the country to avoid arrest. That scenario has been replaying itself on a much smaller scale over the past two years as SMEs face difficulty in repaying debt amid the collapse of oil prices and the subsequent fall in government spending. The bankruptcy law will reduce the risk of criminal prosecution for defaulting on debt and promote the restructuring of loans instead.
“The bankruptcy law is a great thing and the banks federation has been pushing for this, to get it fast-tracked,” Mr Al Ghurair said. “Hopefully it will be implemented in the first quarter of next year.”
mkassem@thenational.ae
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Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
Dubai Rugby Sevens
November 30-December 2, at The Sevens, Dubai
Gulf Under 19
Pool A – Abu Dhabi Harlequins, Jumeirah College Tigers, Dubai English Speaking School 1, Gems World Academy
Pool B – British School Al Khubairat, Bahrain Colts, Jumeirah College Lions, Dubai English Speaking School 2
Pool C - Dubai College A, Dubai Sharks, Jumeirah English Speaking School, Al Yasmina
Pool D – Dubai Exiles, Dubai Hurricanes, Al Ain Amblers, Deira International School
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
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Citadel: Honey Bunny first episode
Directors: Raj & DK
Stars: Varun Dhawan, Samantha Ruth Prabhu, Kashvi Majmundar, Kay Kay Menon
Rating: 4/5
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
SPEC%20SHEET%3A%20SAMSUNG%20GALAXY%20S23%20ULTRA
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
MATCH INFO
Everton 2 (Tosun 9', Doucoure 93')
Rotherham United 1 (Olosunde 56')
Man of the Match Olosunde (Rotherham)
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
The Buckingham Murders
Starring: Kareena Kapoor Khan, Ash Tandon, Prabhleen Sandhu
Director: Hansal Mehta
Rating: 4 / 5
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Various Artists
Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
SPECS
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What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
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