Fitch says worst is over as banks in Gulf stabilise

Fitch, the credit rating agency, sees the uncertainty lifting from Gulf banks on the extent of provisioning, but says doubts remain over Dubai's banks.

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The majority of Gulf banks are on a "stable" footing and the worst of their problems with impairments for bad loans is expected to ease this year, according to a new report from Fitch Ratings, which assesses banks' credit throughout the region.

However, banks based in Dubai, including Emirates NBD and Mashreqbank, remain on a "negative" outlook because of their losses on investments and exposure to the restructuring of Dubai World, the conglomerate owned by the Dubai Government. The extent of their losses is expected to be revealed in full-year earnings reports that will begin to emerge this week.

"In most countries, these problems have peaked and Fitch expects recoveries and generally lower impairment charges in 2011," the report said.

"Loan growth has been generally low, as the banks remain cautious and there is limited demand, but Fitch expects revenue to increase as infrastructure projects come on stream, stimulating the local economies."

Khalid Howladar, a senior credit officer at Moody's Investors Service, said although balance sheets at Gulf banks were recovering, uncertainties among local corporations could constrain future lending attempts.

In the UAE, companies including Al Jaber Group and Zabeel Investments have recently begun discussions to restructure their debts.

Provisions for non-performing loans across the banking sector hit Dh41.2 billion (US$11.21bn) in November, rising 28.75 per cent on the preceding 12 months, according to the most recent data from the Central Bank. Analysts predict that could rise next month as new Central Bank regulations take hold.

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