Gulf banks with exposure to bad property loans could be forced under or require government funds to survive, according to the company that is restructuring Lehman Brothers.
Alvarez and Marsal, which is advising on Lehman, the world's biggest bankruptcy, expects local lenders to face increasing exposure to property-related distressed debt this year.
The Gulf has so far been immune from the bank failures that swept across North America and Europe in the wake of Lehman's bankruptcy last year."Whatever happens, the lenders here will be getting a haircut. It's inevitable," said Sankar Krishnan, the managing director of Alvarez and Marsal Middle East.
"We believe there will be banks that will fail. Some will either be consolidated or bailed out depending on what kind of serious trouble they're in. The banks that are involved in real estate, and a lot of them are, they are in the toughest position. A lot of them don't have visibility as to what's happening on the projects they are involved with."
The warning comes as banks across the Gulf prepare to report second-quarter earnings that are widely expected to contain more provisions on bad loans made on stalled or cancelled property projects. Increased provisions on personal lending, together with flat loan growth and exposure to the troubled Saad and Al Gosaibi family trading groups in Saudi Arabia are also likely to hurt earnings.
Stimulus measures from regional authorities, such as the recent bond guarantee by the UAE Government or the purchase of banks' property assets by the Qatari government, are unlikely to be reflected in second-quarter earnings.
The Central Bank has introduced a series of measures to ensure that UAE banks are sufficiently capitalised and that their loan books are covered by deposits held in their vaults.
Al Mal Capital expects average net profits of the UAE's five main banks, Abu Dhabi Commercial Bank, Emirates NBD, First Gulf Bank, National Bank of Abu Dhabi and Union National Bank, to be 9 per cent below their first-quarter results. This would be 27.5 per cent lower than profits in the second quarter of last year, when the economy was still running at full steam.
"The sizeable drop in expectations is a factor of a tougher economic environment and continued buildup in provisions in 2009," says Deepak Tolani, Al Mal's banking analyst.
Saudi banks should fare slightly better. They are expected to show flat profits compared with the first quarter of this year and a 10 per cent decline from the same period last year. "We continue to expect [Saudi] banks to be risk-averse and their reluctance to originate loans to the private sector is reflected in the negative loan growth in 2009," Mr Tolani said.
Qatari banks are likely to report the best earnings in the region. Sofia el Boury, a banking analyst at Shuaa Capital, said: "Despite being affected by a liquidity shortage like the rest of the GCC, Qatari banks are likely to display less risks on their balance sheets, especially following recent government moves."
The Qatari government put aside US$4.1bn [Dh15.06bn) to buy local banks' property portfolios after buying listed shares in their investment portfolios earlier in the year.
QNB, Qatar's largest financial institution, last week posted a net profit of 2.1 billion rials (Dh2.12bn), up 11.3 per cent on the same period last year.Most analysts expect banks to delay the big write-offs for non-performing loans in the property and personal sectors until the second half.
"The big question mark is the write-offs. We won't see the bulk of provisions in the second quarter, but only feel the full effect in the second half," Mrs el Boury said.
Islamic banks may also be carrying excessive investment exposure to property investments according to a report from Unicorn Investment Bank of Bahrain and Doha Islamic published yesterday. The over-reliance of many Islamic investment banks on property means that the underlying values of their portfolios have declined, too, the report says.
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Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
MATCH INFO
Championship play-offs, second legs:
Aston Villa 0
Middlesbrough 0
(Aston Villa advance 1-0 on aggregate)
Fulham 2
Sessegnon (47'), Odoi (66')
Derby County 0
(Fulham advance 2-1 on aggregate)
Final
Saturday, May 26, Wembley. Kick off 8pm (UAE)
The Energy Research Centre
Founded 50 years ago as a nuclear research institute, scientists at the centre believed nuclear would be the “solution for everything”.
Although they still do, they discovered in 1955 that the Netherlands had a lot of natural gas. “We still had the idea that, by 2000, it would all be nuclear,” said Harm Jeeninga, director of business and programme development at the centre.
"In the 1990s, we found out about global warming so we focused on energy savings and tackling the greenhouse gas effect.”
The energy centre’s research focuses on biomass, energy efficiency, the environment, wind and solar, as well as energy engineering and socio-economic research.
How to register as a donor
1) Organ donors can register on the Hayat app, run by the Ministry of Health and Prevention
2) There are about 11,000 patients in the country in need of organ transplants
3) People must be over 21. Emiratis and residents can register.
4) The campaign uses the hashtag #donate_hope
How green is the expo nursery?
Some 400,000 shrubs and 13,000 trees in the on-site nursery
An additional 450,000 shrubs and 4,000 trees to be delivered in the months leading up to the expo
Ghaf, date palm, acacia arabica, acacia tortilis, vitex or sage, techoma and the salvadora are just some heat tolerant native plants in the nursery
Approximately 340 species of shrubs and trees selected for diverse landscape
The nursery team works exclusively with organic fertilisers and pesticides
All shrubs and trees supplied by Dubai Municipality
Most sourced from farms, nurseries across the country
Plants and trees are re-potted when they arrive at nursery to give them room to grow
Some mature trees are in open areas or planted within the expo site
Green waste is recycled as compost
Treated sewage effluent supplied by Dubai Municipality is used to meet the majority of the nursery’s irrigation needs
Construction workforce peaked at 40,000 workers
About 65,000 people have signed up to volunteer
Main themes of expo is ‘Connecting Minds, Creating the Future’ and three subthemes of opportunity, mobility and sustainability.
Expo 2020 Dubai to open in October 2020 and run for six months
COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The story in numbers
18
This is how many recognised sects Lebanon is home to, along with about four million citizens
450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
77,400
The number of people believed to be affected by the current nationality law, according to the 2009 UN study
4,926
This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
ON%20TRACK
%3Cp%3EThe%20Dubai%20Metaverse%20Assembly%20will%20host%20three%20main%20tracks%3A%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EEducate%3A%3C%2Fstrong%3E%20Consists%20of%20more%20than%2010%20in-depth%20sessions%20on%20the%20metaverse%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EInspire%3A%3C%2Fstrong%3E%20Will%20showcase%20use%20cases%20of%20the%20metaverse%20in%20tourism%2C%20logistics%2C%20retail%2C%20education%20and%20health%20care%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EContribute%3A%3C%2Fstrong%3E%20Workshops%20for%20metaverse%20foresight%20and%20use-case%20reviews%3C%2Fp%3E%0A
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5