WOOPS: Goldman says Dubai needs $2.2 billion to cover bank’s debt

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Goldman Sachs says the United Arab Emirates’ third largest bank by assets may need to set aside as much as $2.2 billion by 2013 to cover bad loans, Bloomberg reports.

Emirates NBD PJSC is one of the largest creditors to Dubai World, which reached a deal with creditors in March to delay payments on $25 billion in loans.

Adding to concerns, Emirates is a major lender to Dubai Holding LLC, who are in talks to reschedule payments on $10 billion in debt and in October the bank was ordered to take over the failed Dubai Bank.

The bank has been put on a credit watch by Fitch amid a rising volume of non-performing loans across the principality:

Non-performing loans on the books of Dubai’s banks will peak at 15 percent to 16 percent in 2013, up from 4.8 percent in 2009 and 11.3 percent in 2010, investment bank Exotix Ltd. said Dec. 4. Moody’s Investors Service expects provisions to peak at 13 percent to 16 percent next year, it said in a report Nov. 3.

“The significant increase in the renegotiated private sector loans hides the true extent of the banks’ asset quality problems,” Fitch Rating said in a report on U.A.E. banks yesterday. “Whilst fundamental credit issues in the operating environment remain unresolved, some of these loans may re-emerge as non-performing loans.”

As it becomes increasingly likely that that a new round of racapitalization will be required in the U.A.E., the Abu Dhabi Investment Authority named Benjamin C. Weston as its new global head of alternative investments. Weston is a former JP Morgan banker who most recently oversaw a joint venture between Credit Suisse and Qatar.

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