Banks across the Middle East are financially stable, but bad loans and political uncertainty still weigh on some lenders, Fitch Ratings, one of the world's biggest credit ratings agencies, said yesterday.
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The outlook for next year was "generally stable" for banks, Fitch analysts said. But the ratings giant singled out the UAE's banks as some of the most stressed in the region.
Despite a gradual recovery in the Gulf's economic fortunes thanks to high oil prices and a tide of public spending on infrastructure development, bad loans in the country's banking system are still on the rise.
Provisioning by UAE banks for bad loans rose by 17.2 per cent to Dh51.9 billion (US$14.12bn) in the first 10 months of the year, according to Central Bank figures.
The health of loan books in the Gulf "is expected to recover, except for the UAE", the analysts wrote.
"Fitch believes that problem loans have peaked and expects recoveries and generally lower impairment charges in 2012," they said. Nonetheless, government spending is expected to provide a substantial boost for regional banks next year - especially in the Gulf. Banks benefit from public infrastructure spending mainly because they finance activities by companies that win contracts from governments to build roads, bridges, schools, hospitals and other projects.
"Most sovereigns in the region, especially in the GCC, are helping to stimulate their economies through government-sponsored infrastructure projects, taking advantage of their significant government revenue and sovereign wealth funds," Fitch said. "The oil price has remained above $100 per barrel, generating strong revenues, comfortably above budget requirements."
As worries about defaults subside in the region, Fitch said it expected profits to gradually improve. Some banks are expected to sell bonds as a means to diversify their sources of funding, Fitch said.
Loan growth is expected to tick upwards, and "viability ratings" may also be raised for some banks.
Those ratings "may be upgraded case by case as the banks recover from recent asset quality and profitability issues, although some UAE banks, in particular, may experience [viability rating] downgrades," Fitch said.
afitch@thenational.ae
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WHAT IS A BLACK HOLE?
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4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
THE BIO
Ms Davison came to Dubai from Kerala after her marriage in 1996 when she was 21-years-old
Since 2001, Ms Davison has worked at many affordable schools such as Our Own English High School in Sharjah, and The Apple International School and Amled School in Dubai
Favourite Book: The Alchemist
Favourite quote: Failing to prepare is preparing to fail
Favourite place to Travel to: Vienna
Favourite cuisine: Italian food
Favourite Movie : Scent of a Woman
Other acts on the Jazz Garden bill
Sharrie Williams
The American singer is hugely respected in blues circles due to her passionate vocals and songwriting. Born and raised in Michigan, Williams began recording and touring as a teenage gospel singer. Her career took off with the blues band The Wiseguys. Such was the acclaim of their live shows that they toured throughout Europe and in Africa. As a solo artist, Williams has also collaborated with the likes of the late Dizzy Gillespie, Van Morrison and Mavis Staples.
Lin Rountree
An accomplished smooth jazz artist who blends his chilled approach with R‘n’B. Trained at the Duke Ellington School of the Arts in Washington, DC, Rountree formed his own band in 2004. He has also recorded with the likes of Kem, Dwele and Conya Doss. He comes to Dubai on the back of his new single Pass The Groove, from his forthcoming 2018 album Stronger Still, which may follow his five previous solo albums in cracking the top 10 of the US jazz charts.
Anita Williams
Dubai-based singer Anita Williams will open the night with a set of covers and swing, jazz and blues standards that made her an in-demand singer across the emirate. The Irish singer has been performing in Dubai since 2008 at venues such as MusicHall and Voda Bar. Her Jazz Garden appearance is career highlight as she will use the event to perform the original song Big Blue Eyes, the single from her debut solo album, due for release soon.
Our legal advisor
Rasmi Ragy is a senior counsel at Charles Russell Speechlys, a law firm headquartered in London with offices in Europe, the Middle East and Hong Kong.
Experience: Prosecutor in Egypt with more than 40 years experience across the GCC.
Education: Ain Shams University, Egypt, in 1978.
How the UAE gratuity payment is calculated now
Employees leaving an organisation are entitled to an end-of-service gratuity after completing at least one year of service.
The tenure is calculated on the number of days worked and does not include lengthy leave periods, such as a sabbatical. If you have worked for a company between one and five years, you are paid 21 days of pay based on your final basic salary. After five years, however, you are entitled to 30 days of pay. The total lump sum you receive is based on the duration of your employment.
1. For those who have worked between one and five years, on a basic salary of Dh10,000 (calculation based on 30 days):
a. Dh10,000 ÷ 30 = Dh333.33. Your daily wage is Dh333.33
b. Dh333.33 x 21 = Dh7,000. So 21 days salary equates to Dh7,000 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to five years.
2. For those who have worked more than five years
c. 333.33 x 30 = Dh10,000. So 30 days’ salary is Dh10,000 in gratuity entitlement for each year of service.
Note: The maximum figure cannot exceed two years total salary figure.
UAE currency: the story behind the money in your pockets
