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Banks Told to Come Clean

T. Ramavarman / 1 October 2009

ABU DHABI — There was a flurry of submissions by the banks listed on the Abu Dhabi Securities Exchange, or ADX, on Wednesday after a directive from the market regulator, the Securities and Commodities Authority, to provide details of their exposure to troubled Saudi conglomerates Saad Group and Al Gosaibi.

Similarly, the Dubai Financial Market, or DFM, has also asked the banks listed on its exchange to disclose the provisions taken in their third quarter financial statements.

The directives from the regulators came after Sultan bin Nasser Al Suwaidi, Governor of the UAE Central Bank, disclosed on Monday that 13 local banks have exposure to the Saudi conglomerates and their affiliates.  National Bank of Abu Dhabi, National Bank of Fujairah and Sharjah Islamic Bank have provided the details of their exposure to the troubled-Saudi groups to the ADX. Abu Dhabi Commercial Bank had provided the details of its exposure earlier.   Rakbank, United Arabic Bank, Commercial Bank International, Bank of Sharjah, and Invest Bank said that they have no exposure the Saudi groups. The National Bank of Umm Al Qaiwain disclosed that they have only “negligible exposure,” while Sharjah Islamic Bank has Dh55.4 million exposure to the Al Gosaibi Group but it had no exposure to theSaad Group.

The First Gulf Bank in its statement said its exposure details were being finalised and with the help of the auditors and the UAE Central Bank.  Interestingly, Abu Dhabi Islamic Bank has declined to give the details of the exposure to the Saudi groups, as it wanted to “respect the client relationship confidentiality.”   NBAD, the country’s second largest bank, said it had a total exposure of $8.7 million and out of which $7.5 million was given to Al Gosaibi Group as a syndicated loan and the rest had been invested in a sukuk issued by the Saad Group.   According to the disclosure details posted on the ADX website, National Bank of Fujairah said its exposure to Saudi Arabia’s Algosaibi Group was $10.2 million and it also had $15.2 million outstanding with Saad’s Bahrain unit, Awal Bank.  

The Fujairah bank said it had taken $3.3 million for Algosaibi and $6.5 million for Awal Bank in provisions as of August 31.   ADCB, the UAE’s third largest lender by assets, had disclosed last week that it had $609 million exposure to the Saudi conglomerates, the highest among the local banks so far. Saad Group and Ahmad Hamad Al Gosaibi & Bros. Co., or AHAB, had plunged into troubles in May after they failed to meet some of their debt obligations. The development caused massive impact across the regional banking system. After their annual meeting here on Tuesday, Gulf central bankers warned the commercial banks not to expect government bailouts of defaulting borrowers, and directed them to make provisions to protect the deposits of the customers.   Welcoming the initiative of the ADX and DFM, Giyas Gokkent, chief economist and the head of asset management group at NBAD, said that greater disclosure by listed companies is investor friendly.

“ADX and DFM are obviously working to this end,” he said.


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