Web money

Islamic Bank of Abu Dhabi undeterred by pandemic damage | Salaam Gateway

Posted on November 09, 2020 via Bloomberg Politics & Policy – Abu Dhabi’s largest Islamic bank is adopting an optimistic tone despite emerging from the global pandemic with one of the highest shares of bad debt among its peers.

Abu Dhabi Islamic Bank PJSC emerged “fairly unscathed” from a loan deferral program put in place as part of the UAE’s central bank’s relief efforts during the outbreak, according to Mohamed Abdel Bary, chief financial officer of the United Arab Emirates. lender’s group. Known as ADIB, the bank sees “no significant pressure” on customers as they navigate the pandemic, he said in an interview.

Regulatory measures saved banks time by freeing up liquidity and ensuring access to finance as the UAE economy was strained by the double shock of coronavirus and falling oil prices . But with the program expiring at the end of the year, local lenders have set aside more money in anticipation of the likely deterioration in asset quality.

In ADIB’s case, non-performing loans have already reached nearly 9% of the total in the last quarter, according to Bloomberg Intelligence, the region’s second-largest bank that released financial statements for the period. This is an increase from 8.4% in the previous three months and an average of 7.5% for UAE-based banks in the second quarter, according to the International Monetary Fund.

Compared to many of its peers, ADIB has allocated less money when provisioning bad debts, according to Bloomberg Intelligence. Depreciation amounted to 245.5 million dirhams ($ 66.8 million) in the third quarter, down nearly 24% from the previous quarter. Credit provisioning is still up 73% over the first nine months compared to last year.

The bank is “watching very closely” the customers who have been offered to delay payments, according to the chief financial officer. The decline in provisioning shows the bank is “on the right track,” he said in a separate interview with Bloomberg Television.

“It’s a reflection of how the market started to move,” he said.

But the risk is that lenders will become more vulnerable once the stimulus packages expire. S&P Global Ratings has warned of an extended period of reduced profitability for banks in the region, predicting that the quality of their assets could deteriorate more quickly when regulatory forbearance measures are lifted.

“It is too early to conclude on the state of deferred loans in the United Arab Emirates, as the formation of bad debts could be delayed by the monetary support program which ends in December,” said Edmond Christou, analyst at Bloomberg Intelligence . “Nonetheless, we believe that banks with soft hedging are likely to maintain provisioning given the continued pressure on the value of collateral. “

The CFO also said:

  • “If we decide to grow in an inorganic way, this has to be an opportunity that makes sense for ADIB as a franchise. It must make sense to who we represent, who we are, what we believe in and where we want to go. “
  • The bank does not exclude transactions with a particular sector
  • “Everything will be examined. However, we do take into consideration whether these specific transactions match our risk appetite. “
  • Regarding the bank’s exposure to Abu Dhabi hospital operator NMC Health Plc, the CFO said he had made “adequate arrangements at this stage.”

For more articles like this, please visit us at bloomberg.com

© 2020 Bloomberg LP All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info)

DISCLAIMER: This content is provided to us “as is” and not modified by any external third party provider. We cannot attest or guarantee the accuracy of the information provided in this article by the external third-party provider. We do not endorse any views or opinions included in this article.