ABU DHABI: UAE bourses formally asked listed banks to disclose their exposure to indebted Saudi groups Saad and Algosaibi on Wednesday, with one exchange threatening to suspend trading if they fail to comply.
The requests for details of exposure and provisions apply to 13 banks on the Abu Dhabi Securities Exchange (ADX) index and six listed on the Dubai Financial Market.
The ADX directive led to a flurry of statements by listed banks on its index and comes after the central bank governor said this week that 13 banks in the country were exposed to the troubled Saudi firms.
ADX sent out a circular urging banks to provide any exposure details or a date when the information can be provided, or face a suspension in the trading of their shares. “Banks have been responding to our circular but so far no trading has been suspended,” Khaled Al-Suwaidi, head of the listing companies department at ADX, told Reuters.
Later on Wednesday, the Dubai Financial Market said it wanted similar disclosure from banks, and that lenders had to announce any provisions in their third-quarter results.
Banks listed on the DFM index include Emirates NBD, the country’s biggest by assets, and Mashreq which is in a legal battle with Algosaibi and related parties.
Abu Dhabi listed banks include No. 3 bank Abu Dhabi Commercial Bank, which said last week it held $609 million in exposure to the Saudi firms, the biggest official disclosure of potential losses against the groups.
Gulf central bankers on Tuesday warned commercial banks not to expect government bailouts of defaulting borrowers.
The central bank officials also played down risks to the Gulf region’s banking systems from the debt debacle.
“It’s good we have the policymakers saying the banking situation is good, but we have nothing tangible in dissecting what is going on,” said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.
“(The market) is overshadowed because of the lack of clarity on Saad and Algosaibi. We would like to get a clearer picture on the banks.”
Lenders have upped provisions against loan losses as a result of their Saudi exposure, dampening second-quarter earnings and raising concerns about full-year profits. Standard & Poor’s estimates that 30 Gulf Arab banks have a combined exposure of $9.6 billion.
In July, the UAE central bank directed banks to take provisions over a two-year period of 50 percent against Algosaibi exposure and 75 percent on Saad. “The UAE central bank is playing a big role in this whole Saad, Algosaibi exposure saga ... perhaps, ADX wants to show it can play its role and question banks to protect investors,” said a banker in Abu Dhabi.
Abu Dhabi Islamic Bank said it had booked 836 million dirhams ($227.6 million) in provisions as of June 30 but declined to specify how much of that is related to the Saudi firms.
The bank also said it was in compliance with central bank guidelines on provisions for non-performing exposures both within the UAE and outside it.
Meanwhile, First Gulf Bank said it was working with external auditors and the central bank to determine the amount of its exposure.
National Bank of Fujairah said its exposure to the Algosaibi Group was $10.2 million and it also had $15.2 million outstanding with Saad’s Bahrain unit, Awal Bank.
The bank said it had taken provisions of $3.3 million for Algosaibi and $6.5 million for Awal Bank as of Aug. 31. Bahrain’s central bank in July seized Saad’s Awal Bank unit and a bank owned by Algosaibi, The International Banking Corporation, saying they had substantial shortfalls of assets relative to liabilities.
Meanwhile, Sharjah Islamic Bank said its exposure to Saudi Arabia’s Algosaibi Group was 55 million dirhams ($15 million), but it had no exposure to the Saad Group.
Five other banks — United Arab Bank, RAKBank, Bank of Sharjah, Invest Bank and Commercial Bank International — said they had no exposure to the two groups. National Bank of Abu Dhabi reiterated its July announcement that it had $7.5 million in exposure to Algosaibi and $3.4 million in exposure to Saad.