A $1.91bn private sector initiative will help the region’s struggling SMEs, and perhaps some bank balance sheets.
The United Arab Emirates (UAE) Banks Federation has announced a multi-billion dollar package to help 1700 of the emirates’ indebted small- and medium-sized enterprises (SME).
The federation’s 49 member banks will restructure or extend Dh7bn ($1.91bn) of loans they have made to SMEs, which have become a bigger default risk as low oil prices hit the real economy.
The initiative is designed to help SMEs, which generate more than 90% of the private sector’s contribution to gross domestic product (GDP). But it may also help some UAE banks reduce their non-performing loan (NPL) ratios.
According to data collected by The Banker, the NPL ratio of the UAE’s biggest 21 banks is 4.51% (as at the end of 2015), compared with the average for the world’s biggest 1000 banks of 3.62%.
Emirates NBD, the UAE’s biggest bank by Tier 1 capital, has an NPL ratio of 7.1%. It is second only to the Bank of Sharjah, which comes in at 8.62%, while the Commercial Bank of Dubai is third at 6.9%.
Abu Dhabi-based lenders fare better than Dubai’s. The National Bank of Abu Dhabi, FGB and Abu Dhabi Commercial Bank – the UAE’s second, third and fourth biggest banks by Tier 1 capital – have NPL ratios that hover between 2.76% and 3%.
All banks in the chart are members of the UAE Banks Federation, except for Bank of Sharjah.
All data sourced from www.thebankerdatabase.com
