Some banks including HSBC, RAKBank and Standard Chartered have shed jobs in anticipation of lower growth. Ravindranath K / The National
Some banks including HSBC, RAKBank and Standard Chartered have shed jobs in anticipation of lower growth. Ravindranath K / The National

Lenders tightening up as defaults spread from SMEs to larger companies



Turnaround specialists have warned that regional companies face a looming cash-flow crisis as banks pull back from lending amid US$30 oil.

Lenders are reporting a sharp rise in non-performing loans that started among smaller companies and is extending to larger corporates as firms seek to conserve cash and governments face funding pressures because of the weak oil price.

“When banks ask companies to repay their short-term debt and companies aren’t able to find additional funding, this will be the moment where some sort of crisis will happen,” said Eugenio Berenga, the managing director of AlixPartners in Dubai. “The larger ones are already thinking about which costs they can reduce and work from a lower cost base. This is already happening quietly.”

Gulf governments are cutting spending after the oil price plunged 70 per cent over the last 18 months. The drop has sent regional stock markets tumbling while many companies have cut staff or trimmed benefits.

Banks are retreating from lending to small businesses as they come under pressure to conserve cash and protect themselves from customer defaults. Some, including RAKBank, HSBC and Standard Chartered, have shed jobs in anticipation of lower growth.

Regional stock markets are also being battered by the weak oil price with shares in Dubai and Abu Dhabi off about 2.9 per cent and 3.8 per cent respectively since the start of the year.

But it is Saudi Arabia that has seen the biggest declines with the Tadawul declining 13.5 per cent for the year to date to figure among the world’s worst performing markets.

The slowdown in Saudi Arabia has had a particularly big effect on the construction and industrial sectors as banks reduce lending amid tightening liquidity.

“We met several banks in Saudi who were a little bit concerned because they won’t be able to keep on extending and increasing credit lines for industrial companies,” said Mr Berenga.

“This was the norm during the last three years when companies were borrowing short-term debt to repay longer-term debt.”

Simon Freakley, the global chief executive of AlixPartners and former boss of Kroll, the global corporate investigation company, says that the perception of risk in the region has also changed since the 2008 financial crisis.

“What is different to the financial crisis is the region is seen to be riskier from a geopolitical point of view because of what is happening with ISIL and what have you,” he said in Dubai.

“Attracting money to the region from outside the region is much more difficult than it was because of this perception of risk. So you have the double jeopardy of the low oil price not generating the revenues locally, and the difficulty in attracting foreign direct investment as people assess the stability of the region. So I think it is quite a challenging time.”

The need to conserve cash is becoming a priority for corporations across the region, according to Bharat Gupta, a senior director of the turnaround consultancy Alvarez & Marsal Middle East.

“The low oil price is having a cascading effect down the value chain. It has already had a significant effect on the profitability and liquidity of sectors like construction, oilfield services and shipping across the region,” Mr Gupta said.

“Consumer sentiment has dropped and we’ve seen the effect of that on lower retail sales and reduced margins for distributors. These types of businesses will continue to face both revenue growth and liquidity challenges. Aligning cost structure to lower revenues and being smarter with liquidity management is critical.”

scronin@thenational.ae

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WHAT IS GRAPHENE?

It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were experimenting with sticky tape and graphite, the material used as lead in pencils.

Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But when they repeated the process many times, the flakes got thinner.

By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment led to graphene being isolated for the very first time.

In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. 

Brief scores:

Liverpool 3

Mane 24', Shaqiri 73', 80'

Manchester United 1

Lingard 33'

Man of the Match: Fabinho (Liverpool)

How it works

1) The liquid nanoclay is a mixture of water and clay that aims to convert desert land to fertile ground

2) Instead of water draining straight through the sand, it apparently helps the soil retain water

3) One application is said to last five years

4) The cost of treatment per hectare (2.4 acres) of desert varies from $7,000 to $10,000 per hectare 

Malcolm & Marie

Directed by: Sam Levinson

Starring: John David Washington and Zendaya

Three stars

The biog

Favourite book: Animal Farm by George Orwell

Favourite music: Classical

Hobbies: Reading and writing

 

Fifa Club World Cup quarter-final

Kashima Antlers 3 (Nagaki 49’, Serginho 69’, Abe 84’)
Guadalajara 2 (Zaldivar 03’, Pulido 90')

UAE currency: the story behind the money in your pockets
How being social media savvy can improve your well being

Next time when procastinating online remember that you can save thousands on paying for a personal trainer and a gym membership simply by watching YouTube videos and keeping up with the latest health tips and trends.

As social media apps are becoming more and more consumed by health experts and nutritionists who are using it to awareness and encourage patients to engage in physical activity.

Elizabeth Watson, a personal trainer from Stay Fit gym in Abu Dhabi suggests that “individuals can use social media as a means of keeping fit, there are a lot of great exercises you can do and train from experts at home just by watching videos on YouTube”.

Norlyn Torrena, a clinical nutritionist from Burjeel Hospital advises her clients to be more technologically active “most of my clients are so engaged with their phones that I advise them to download applications that offer health related services”.

Torrena said that “most people believe that dieting and keeping fit is boring”.

However, by using social media apps keeping fit means that people are “modern and are kept up to date with the latest heath tips and trends”.

“It can be a guide to a healthy lifestyle and exercise if used in the correct way, so I really encourage my clients to download health applications” said Mrs Torrena.

People can also connect with each other and exchange “tips and notes, it’s extremely healthy and fun”.

Du Football Champions

The fourth season of du Football Champions was launched at Gitex on Wednesday alongside the Middle East’s first sports-tech scouting platform.“du Talents”, which enables aspiring footballers to upload their profiles and highlights reels and communicate directly with coaches, is designed to extend the reach of the programme, which has already attracted more than 21,500 players in its first three years.

Juliet, Naked
Dir: Jesse Peretz
Starring: Chris O'Dowd, Rose Byrne, Ethan Hawke​​​​​​​
​​​​​​​Two stars

In numbers

- Number of children under five will fall from 681 million in 2017 to 401m in 2100

- Over-80s will rise from 141m in 2017 to 866m in 2100

- Nigeria will become the world’s second most populous country with 791m by 2100, behind India

- China will fall dramatically from a peak of 2.4 billion in 2024 to 732 million by 2100

- an average of 2.1 children per woman is required to sustain population growth

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Engine: Long-range dual motor with 400V battery
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Transmission: Single-speed automatic
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0-100km/h: 4.7sec
Top speed: 210kph
Price: From Dh360,000
On sale: September

Medicus AI

Started: 2016

Founder(s): Dr Baher Al Hakim, Dr Nadine Nehme and Makram Saleh

Based: Vienna, Austria; started in Dubai

Sector: Health Tech

Staff: 119

Funding: €7.7 million (Dh31m)

 

The specs

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Power: 620hp from 5,750-7,500rpm
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UAE currency: the story behind the money in your pockets
The specs

Engine: 2.0-litre 4-cyl turbo

Power: 247hp at 6,500rpm

Torque: 370Nm from 1,500-3,500rpm

Transmission: 10-speed auto

Fuel consumption: 7.8L/100km

Price: from Dh94,900

On sale: now

Five famous companies founded by teens

There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:

  1. Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate. 
  2. Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc. 
  3. Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway. 
  4. Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
  5. Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.