GCC bank ratings at risk as governments pull deposits



Moody’s warned that GCC banks could face renewed pressure on their credit ratings, even as new data showed that government withdrawals continued into January.

Government deposits at UAE banks fell by 11.6 per cent in the 12 months to January, scraping levels last reached in 2011, data from the Central Bank shows.

Total deposits, including from the private sector and residents, continued to rise on an annualised basis, climbing by 4.2 per cent against the previous year. But monthly deposit growth has crawled to a halt, with deposits in January falling by 0.03 per cent against last December.

Oil prices scraped 12-year lows in January, as Opec states produced 33.1 million barrels – the bloc’s highest-ever output. Low oil prices have led government-related entities to pull their cash out of banks as they seek to make up for lost revenues from slower growth and cheaper commodities.

That is hitting bank operating conditions, the ratings agency Moody’s said in a research note published on Monday.

“Liquidity has been tightening due to significantly reduced deposit inflows from government and government-related entities,” Moody’s wrote in a research note. “Destabilising outflows have been avoided, how­ever, partly because GCC governments have relied on borrowing instead of significantly depleting their cash balances held in the banking system.”

Nonperforming loans could increase if the low oil price continues.

An IMF analysis said that the region’s weakest banks could face increases in nonperforming loans of up to 18.5 per cent after three years, if the oil price remains at current levels.

“Nonperforming loans will increase because the economy’s slowing, and as it slows, things may turn for the worse going forward,” said Sanyalak Manibhandu, the head of research at National Bank of Abu Dhabi.

Falling deposits are more likely to lead to slower loan growth, rather than worsening the liq­uidity positions of domestic banks, Mr Manibhandu said.

“What may happen is that if banks want to continue to lend at current rates, they will prob­ably have to raise capital.”

Moody’s believes that spending cuts might make Gulf governments less able or willing to intervene in their domestic banking systems, if a liquidity crisis occurs.

“Lower government financial reserves could lead to a shift in policy towards more selective support” for domestic banks, the ratings agency said.

After the global financial crisis of 2008 hit the Gulf, Abu Dhabi recapitalised local banks, while Qatar’s government stepped in to guarantee deposits. But Mr Manibhandu thought that the government would remain willing to step in if need be. “Nobody is seeing that there is a need for either the federal government or Abu Dhabi government to [support banks] … [but] they would do it if they needed to do it,” he said.

Saif Al Shamsi, the UAE Central Bank’s assistant governor for monetary policy and financial stability, told Reuters that commercial banks have “very comfortable” levels of liquidity.

abouyamourn@thenational.ae

Follow The National's Business section on Twitter

Drishyam 2

Directed by: Jeethu Joseph

Starring: Mohanlal, Meena, Ansiba, Murali Gopy

Rating: 4 stars

The specs: Macan Turbo

Engine: Dual synchronous electric motors
Power: 639hp
Torque: 1,130Nm
Transmission: Single-speed automatic
Touring range: 591km
Price: From Dh412,500
On sale: Deliveries start in October

Company Profile

Company name: Cargoz
Date started: January 2022
Founders: Premlal Pullisserry and Lijo Antony
Based: Dubai
Number of staff: 30
Investment stage: Seed

‘FSO Safer’ - a ticking bomb

The Safer has been moored off the Yemeni coast of Ras Issa since 1988.
The Houthis have been blockading UN efforts to inspect and maintain the vessel since 2015, when the war between the group and the Yemen government, backed by the Saudi-led coalition began.
Since then, a handful of people acting as a skeleton crew, have performed rudimentary maintenance work to keep the Safer intact.
The Safer is connected to a pipeline from the oil-rich city of Marib, and was once a hub for the storage and export of crude oil.

The Safer’s environmental and humanitarian impact may extend well beyond Yemen, experts believe, into the surrounding waters of Saudi Arabia, Djibouti and Eritrea, impacting marine-life and vital infrastructure like desalination plans and fishing ports. 

'Midnights'

Artist: Taylor Swift

Label: Republic Records

Rating: 4/5

About Housecall

Date started: July 2020

Founders: Omar and Humaid Alzaabi

Based: Abu Dhabi

Sector: HealthTech

# of staff: 10

Funding to date: Self-funded

The US Congress, explained

- US Congress is divided into two chambers: the House of Representatives and Senate

- 435 members make up the House, and 100 in the Senate

- A party needs control of 218 seats to have a majority in the House

- In the Senate, a party needs to hold 51 seats for control

- In the event of a 50-50 split, the vice president's party retains power in the Senate

Company Profile

Name: Takestep
Started: March 2018
Founders: Mohamed Khashaba, Mohamed Abdallah, Mohamed Adel Wafiq and Ayman Taha
Based: Cairo, Egypt
Sector: health technology
Employees: 11 full time and 22 part time
Investment stage: pre-Series A

Name: Peter Dicce

Title: Assistant dean of students and director of athletics

Favourite sport: soccer

Favourite team: Bayern Munich

Favourite player: Franz Beckenbauer

Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates 

 

The specs: 2024 Mercedes E200

Engine: 2.0-litre four-cyl turbo + mild hybrid
Power: 204hp at 5,800rpm +23hp hybrid boost
Torque: 320Nm at 1,800rpm +205Nm hybrid boost
Transmission: 9-speed auto
Fuel consumption: 7.3L/100km
On sale: November/December
Price: From Dh205,000 (estimate)

The five pillars of Islam

1. Fasting

2. Prayer

3. Hajj

4. Shahada

5. Zakat

The Roundup

Director: Lee Sang-yong
Stars: Ma Dong-seok, Sukku Son, Choi Gwi-hwa
Rating: 4/5

Zidane's managerial achievements

La Liga: 2016/17
Spanish Super Cup: 2017
Uefa Champions League: 2015/16, 2016/17, 2017/18
Uefa Super Cup: 2016, 2017
Fifa Club World Cup: 2016, 2017

TWISTERS

Director:+Lee+Isaac+Chung

Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos

Rating:+2.5/5

Heavily-sugared soft drinks slip through the tax net

Some popular drinks with high levels of sugar and caffeine have slipped through the fizz drink tax loophole, as they are not carbonated or classed as an energy drink.

Arizona Iced Tea with lemon is one of those beverages, with one 240 millilitre serving offering up 23 grams of sugar - about six teaspoons.

A 680ml can of Arizona Iced Tea costs just Dh6.

Most sports drinks sold in supermarkets were found to contain, on average, five teaspoons of sugar in a 500ml bottle.

Founders: Abdulmajeed Alsukhan, Turki Bin Zarah and Abdulmohsen Albabtain.

Based: Riyadh

Offices: UAE, Vietnam and Germany

Founded: September, 2020

Number of employees: 70

Sector: FinTech, online payment solutions

Funding to date: $116m in two funding rounds  

Investors: Checkout.com, Impact46, Vision Ventures, Wealth Well, Seedra, Khwarizmi, Hala Ventures, Nama Ventures and family offices

Company profile

Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices

COMPANY PROFILE

Name: Haltia.ai
Started: 2023
Co-founders: Arto Bendiken and Talal Thabet
Based: Dubai, UAE
Industry: AI
Number of employees: 41
Funding: About $1.7 million
Investors: Self, family and friends