Banking

DIFC accounts for 1% of UAE's GDP Dubai International Financial Centre's sub-economy contributed about 3.6 per cent to the gross domestic product of Dubai while accounting for one per cent of the UAE's GDP. The DIFC's GDP grew 5.2 per cent in 2010 compared to 2.77 per cent in 2009. The latest DIFC Economic Activity Survey places the total GDP of the centre's sub-economy at $2.92 billion. This puts DIFC's contribution to Dubai's GDP at 3.6 per cent of $81.96 billion and its contribution to the UAE economy at 0.97 per cent. The economic survey, undertaken by the DIFC Economics Department, is based on international best practices in national accounting, and measures output, intermediate consumption and ultimately the gross value added produced within the DIFC district by entities registered in the centre. DIFC received 477 respondents to the survey which represents nearly 62 per cent of its client base. "The survey results indicate that there was a strong recovery in economic activities in the DIFC last year compared to 2009. We have witnessed the continuation of this in the first half of 2011," said Chief Economist and Head of External Relations of DIFC. NBAD issues 10 billion yen Samurai bond

The National Bank of Abu Dhabi, has issued its inaugural yen-denominated samurai bond, the first ever by a Middle Eastern financial institution. NBAD's issuance of the 15-year, 10 billion Japanese yen (Dh54.7 million) Samurai bond is part of the bank's strategy in diversifying its funding sources and to extend its liability profile. NBAD's samurai bond matures in 2026 and has a fixed coupon rate of 2.6 per cent. Mistubishi UFJ Morgan Stanley Securities and HSBC Securities Japan were the joint lead managers of the bond. UAEs non-performing loans to peak above 10% in 2011 Non-performing loans (NPLs) of the UAE banks are expected to peak above 10 per cent this year up from 8.3 per cent in 2010 and 4.9 per cent in 2009, rating agency Moody's said in a report Thursday. Moody's expects the upcoming Dubai Holding's $10 billion (Dh36.7 billion) debt restructuring will be one significant contributor to this year's NPL levels. "Dubai-based banks typically have high exposures to Dubai government-related entities, and we consequently expect NPLs to peak in 2011 at around 6 per cent to 8 per cent in Abu Dhabi and 11 per cent to 14 per cent in Dubai," said vice-president Senior Credit Officer at Moody's. Despite a projected surge in overall NPLs for the year, the rating agency said the UAE benefits from the

twin growth engines of Abu Dhabi and Dubai. Both are showing signs of recovery in key sectors such as tourism, transport, logistics and both benefit from sizeable state intervention in the economy, particularly support for distressed strategic and government-related corporates. However, a substantial debt overhang, corporate leverage, delayed restructurings and persistent real estate weaknesses after an outsized property boom are constraining market confidence. UAE interbank offered rates at new 7year low Interbank offered rates in the United Arab Emirates continued their slide to a fresh seven-year low, as liquidity in the OPEC member's banking sector stayed high, also dragging one-year dirham forwards lower. Bank deposits had risen to their highest level in at least two years in April as the Gulf Arab state enjoyed a safe-haven status amid regional unrest, but dropped again slightly in May. "It is the high liquidity and the banks now falling in line with what is required by the central bank. A few of the banks who have had higher rates have now brought the rates in line with the other banks which has brought the average down," said, head of forex trading for Middle East and North Africa at Standard Chartered in Dubai. "The banks are now falling in line with what is required by the central bank, which is making the three-month EIBOR come off quite considerably," he said.

Asset quality of UAE banks to remain under pressure Asset quality of leading UAE banks will remain under pressure compared to their regional peers during the current year and could linger on into next year, according to banking analyst with Credit Suisse. "UAE banks are yet to experience the peak in their nonperforming loans [NPLs] to 8.4 per cent, on our estimates for 2011 and will have to adjust to stricter regulatory measures mainly on consumer lending and fees," he said in a report. The NPL ratio for 6 leading UAE banks Credit Suisse covers stood at 7.2 per cent and the provision coverage stood at 51 per cent in 2010. "Given the exposure to Dubai's GREs [government related entities] and a weak real estate market, we expect the NPL ratio for these banks to continue to rise to 8.4 per cent in 2011, while we forecast the provision coverage to increase to 58 per cent," he said. DFSA issues warning over website The Dubai Financial Services Authority (DFSA) issued an alert to the investor community to false, misleading and deceptive statements made by a company named Dubai Investment Financial Capital UAE on their website http://www.difcuae.org/. The website states that "Dubai Investment Financial Capital UAE" is regulated by the DFSA. "This statement is incorrect. Dubai Investment Financial Capital is not regulated by the DFSA, and is not affiliated with the Dubai International Financial Centre [DIFC], despite the use of the initials "DIFC" on the website."

UAE

banks

can

sail

through

despite challenges
The UAE banking sector has surmounted the worst but is anticipated to see another difficult year in 2011, Kuwait-based Global Investment House said. Challenges remain but UAE banks have the ability to sail through, Global said in a report. The return ratios of UAE banks are on an improving trajectory and do not justify the low price multiples that banking stocks are trading at. The investment company said UAE banks still offer good buying opportunities. Now that they are more capitalized and safer than ever, still boasting a healthy top-line, achieving decent loan growth, exhibiting lower provisions and higher profits, UAE banks have the ability to maneuver past rough tides. Globals investment advisory said it strongly believed that a rare second chance to reap the benefits is in the offing and that strong fundamentals should not be overlooked. UAE outpaces GCC in remittance growth Remittances by the UAE-based migrant workers grew 11 per cent in 2010, at a faster pace compared to the 6.1 per cent surge in the amount remitted by expatriates across the GCC. Money remitted by foreign workers in the UAE rose to $10.54 billion in 2010 from $9.51 billion in 2009, a clear indication that after a protracted downturn and a slump in job market during 2008 and 2009, the countrys economy had returned to a recovery mode, chief operating officer of UAE Exchange Centre, said. He said even the uptick in the GCC remittance market in comparison to the

global figures reflects the resilience of the region in the wake of increased investments in development projects. With the exception of the construction related sectors, UAEs traditional industries including trade, hospitality and tourism have shown robust growth to underpin the migrant job market, he said. Total expatriate workers remittances from the GCC rose to $63.75 billion in 2010 from $60.03 billion in the previous year, up 6.1 per cent compared to an upturn of 2.44 per cent in worldwide remittances that, according the World Bank, reached $325 billion from $317.23 billion in 2009. The International Monetary Fund, or IMF, predicted that outward remittances from the GCC, which has over 12 million expatriates and is the second largest source of private financial transfers, second only to the US, are estimated to reach $74.9 billion in 2011 on the back of an allaround growth fuelled by higher oil revenues. A World Bank forecast says that the total amount of remittance to developing nations will continue to increase in the coming years with a growth of about 6.2 per cent in 2011 and 8.1 per cent in 2012. DIFC registered 64 new companies in the first half of 2011 The Dubai International Financial Centre (DIFC) reported that 64 new companies started operation in the first six months of 2011 taking the total of active registered companies operating in the Centre up to 813. While 44 per cent of new regulated companies that joined the DIFC in the first half of 2011 came from the Middle East and Asia, 50 per cent were from Europe and North America,

and 6 per cent from the rest of the world. DIFC management said that in spite of the regional unrest and the continued global economic downturn, DIFC continues to grow as one of world's top international financial centres. As of June 31, 2011, 813 active registered companies have a presence in DIFC compared to 792 in 2010, with 312 regulated and 409 non-regulated companies, and 92 retailers. Saudi banking net profits up 10% Saudi banks posted an increase of 10 per cent in net profits during the first half of 2011, reaching 16 billion Saudi riyals (Dh15.66 billion) against 14.4 billion riyals during the same period last year. All Saudi local banks, except Samba, have registered an increase in net profits during the period. Samba's net profit fell by 8 per cent. The Saudi Investment Bank recorded the highest growth reaching 867 per cent while the lowest growth registered by Saudi Fransi Bank, with one per cent. Credit picks Bahrain up for Oman and

near-term political tensions and our expectation that increased public spending will lift economic growth next year, while fiscal implications will be buffered by the GCC support package." It said Oman had also benefited from an easing of political pressures. "Aside from an isolated killing in Sohar, the protests were largely peaceful, and the quick response of Sultan Qaboos bin Said Al Said to protester demands appears to have eased tensions," S&P said. Qatar central bank restrictions take a toll The central bank released a circular in April placing a ceiling of 400,000 Qatari rials on personal loans to expatriates, and dropping the loan limit for Qatari nationals to 2 million rials from 2.5m rials. The circular also capped the interest rate on all personal loans at 6.5 per cent, compared with current rates of up to 10 per cent. That move followed the central bank's order in February that all commercial banks shut down their Islamic finance operations by the end of the year, which was seen as likely to boost Islamic lenders in the Gulf state.

Standard & Poor's has removed Bahrain and Oman from negative credit watch as the political climate in both countries continues to improve. Bahrain's long and short-term local and foreign currency sovereign credit ratings were affirmed at "BBB/A-3" with negative implications, S&P said. It also affirmed Oman's "A/A-1" long and short-term local and foreign currency ratings. About Bahrain, S&P said: "We are removing the ratings from CreditWatch because of the diminished

New Product/services
DGCX to launch Options Contract Indian Rupee

The Dubai Gold and Commodities Exchange (DGCX) is set to expand its Indian Rupee (INR) product offering with the launch of an INR Options Contract on September 26, 2011. The contract will be the only exchange-traded INR Options product offered to markets

outside India. The provision of an Indian Rupee Options contract will enable us to build on the exceptional volume growth achieved by our Indian Rupee futures contract over the last 12 months and meet member demand to further strengthen our INR offering, CEO of DGCX, said. Standard 4.99% Charted home loan @

in this important currency," said Head of Commercial Banking for the UAE. Tamweel offers up to Dh5m loans to overseas home buyers Tamweel, the Dubai-based Islamic mortgage lender, has entered the nonresident home loan market with the launch of two new financing products. The move, which makes Tamweel the first UAE lender to tap into overseas property investors, comes a month after the Government announced a new three-year visa scheme to overseas buyers of homes worth more than Dh1 million in the UAE. Previously, non-resident home buyers of properties in the Emirates received sixmonth visas. Under Tamweel's nonresidence programme, overseas property buyers will be able to borrow up to Dh5m for completed residential properties in Abu Dhabi and Dubai, with repayment tenure of up to 25 years. Tamweel has also launched a home refinance programme, which allows owners of fully paid properties to unlock up to 50 per cent of the value of their homes. Ajman Bank Credit Cards launches Roadmiles

Slowly the market for the housing loans is becoming extremely competitive. House prices have reached historic bottom levels which has also increasing the risk appetite of the lenders. Standard Charted has further reduced the rates to 4.99% one of the lowest in the industry. It has extended the maximum period to 30 years, amount upto AED 18 Mn with 0% processing fee. HSBC offers yuan accounts in UAE HSBC has started offering dedicated yuan accounts (RMB accounts) at HSBC branches throughout the UAE, the bank said. This move means that UAE-based customers will be able to trade with China, subject to People's Bank of China rules, and receive as well as pay in yuan without having to convert their currency exposure, helping them lower their trading costs, reduce foreign exchange risk and strengthen their relationships with Chinese partners. "Our trade research tells us that the yuan has already overtaken the pound in its use as a settlement currency and traders are telling us that they expect it be one of their top 3 settlement currencies this year. And, as trade with Asia increases, so does global interest

Ajman Bank launched its first loyalty programme in the UAE via new Roadmiles Credit Cards. Roadmiles, which is available with Classic, Premium, and Platinum Credit Cards, is the where points can be redeemed for fuel. Ajman Bank Credit Cardholders earn one Roadmile for every dirham spent on their Card. Accumulated Roadmiles can be redeemed for Fuel Cards to be used for free fuel at petrol stations across the UAE.

ARRA, Ajman Bank partner to boost real estate sector Ajman Real Estate Regulatory Agency (ARRA) and Ajman Bank announced a package of products designed to boost the real estate sector in Ajman. The agreement is the latest output from the ongoing cooperation pact signed between the two organisations late 2010 to offer real estate financing to end users purchasing properties in Ajman. Through the agreement, Ajman Bank will now offer up to 70 per cent financeto-value for select projects registered with ARRA. Furthermore, Ajman Bank will reduce arrangement fees for end users purchasing properties in Ajman. Financing solutions, for up to AED 1 million and tenure of 15 years are available to UAE Nationals, GCC citizens and expatriate residents. Emirates NBD ATMs get DCC service Emirates NBD, and its subsidiary Network International announced, that all its ATM machines in the UAE have been enabled with the Dynamic Currency Conversion, or DCC service, to reflect the amount in the cardholders billing currency for foreign credit cards. Customers using an Emirates NBD ATM to withdraw money will find that the amount withdrawn in UAE Dirhams will be automatically converted into their billing currency, in the statement generated by the issuer of the card. The DCC service provides greater clarity and convenience to cardholders with foreign credit cards.

Compiled by
Risk Management Department Bank of Baroda, Dubai,UAE
Disclaimer
The news items have been compiled from different newspapers and from their websites and do not necessarily reflect the views of the Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/purchase or as an invitation or solicitation to do so for any securities of any entity. Bank of Baroda and / or its affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same.