The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

What more can Abu Dhabi do?

Banks in the UAE are a long way from provisioning for Dubai’s debt and property crises.

Aabar, an Abu Dhabi state-linked investment vehicle, became the second-largest shareholder in UniCredit, Europe’s third-largest bank by market value, in late June. It paid $2.5 billion. Given the parlous state of Dubai’s economy and property market, Abu Dhabi’s interests might be better served by more investment in UAE banks.

The emirates’ corporate and banking sectors are closely intertwined. UAE banks received more than $19 billion in funding from the federal authorities in 2009. The sector’s total capital adequacy rose from 13.3% to 19.2% last year, with the tier 1 ratio rising from 11.7% to 15.5%.

According to a Fitch report in late June, average non-performing loans would now have to more than double before the average tier 1 ratio fell below the central bank’s minimum 8%.

But loans affected by the $23.5 billion restructuring of state investment agency Dubai World might still need to be classified as problematic, despite arrangements for creditors to receive 100% of their claims. According to Reuters, UAE banks have an estimated $15 billion exposure to Dubai World, with Abu Dhabi Commercial Bank and Dubai’s Emirates NBD thought to have the biggest position.

Dubai World’s problems alone could therefore cause the average problem-loan ratio to double to more than 9.5%

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree