Gulf states $50bn largesse supports Mideast sovereign ratings as geopolitical risk rises

People stroll in a traditional market in downtown Amman. Jordan is among the Middle East countries that has received aid from Gulf oil exporters. (AFP)
Updated 28 November 2018

Gulf states $50bn largesse supports Mideast sovereign ratings as geopolitical risk rises

  • Fewer direct disbursements being sent from Gulf
  • Aid packages align with regional strategic interests

LONDON: The sovereign ratings of countries such as Bahrain, Oman and Jordan have been boosted by expectations of support from oil-rich Gulf donor states, according to a new report from S&P.
But actual disbursements may fall short of the promised amounts while budget grants are becoming less prevalent as deposits in central banks and other forms of conditional concessional funding are increasingly the norm.
“We anticipate that GCC sovereigns will likely prioritize funding to key regional partners in the context of volatile prices, weaker GCC net asset positions, and their respective domestic agendas of diversifying their economies awat from hydrocarbons,” S&P Global Ratings said.
Saudi Arabia, the UAE, Kuwait and Qatar this year pledged to give around $50 billion in total aid to 10 countries in the Middle East and Africa.
Beneficiaries included Jordan, Egypt, Bahrain and Morocco.
As a proportion of GDP, funding support from GCC countries has been highest in Jordan, where the economy has absorbed large numbers of Syrian refugees since the start of the Syrian conflict in 2011.
However in absolute terms, Egypt has received the most donor support, S&P said.
Gulf states have pledged large sums as geopolitical risks have increased in the form of tensions between Iran and Saudi Arabia and ongoing conflicts in Yemen and Syria as well as the boycott of Qatar by some of its neighbors.

Higher impairment charges hit UAE banks Emirates NBD and ADCB

Updated 27 January 2020

Higher impairment charges hit UAE banks Emirates NBD and ADCB

DUBAI: Dubai's biggest lender Emirates NBD reported a 15 percent drop in fourth-quarter earnings on Monday, below analysts' forecasts, on a jump in impairment charges, sending its shares down around 1 percent.

The bank booked impairment charges of 2.06 billion dirhams ($560.88 million) in the quarter, up more than three times from a year earlier due to higher bad debt charges as it consolidated results of newly acquired Turkish lender DenizBank.

Even without DenizBank, impairment charges were up 78 percent on lower writebacks and recoveries. The bank did not give details of these charges.

Banks in the United Arab Emirates (UAE) are bracing for more writedowns from the real sector amid a downturn, especially in the Dubai property market.

Fitch Ratings recently warned a weakening property market in the UAE was likely to put more pressure on the asset quality of the banking sector.

Emirates NBD reported a net profit of 2.02 billion dirhams in the fourth-quarter, down from 2.39 billion dirhams in the same period a year earlier. EFG Securities had projected a net profit of 2.45 billion dirhams.

Full year profit, however, surged 44 percent, underpinned by double-digit growth in net interest income, stronger loan growth and gains from the listing of the bank's unit Network International.

Separately, Abu Dhabi Commercial Bank, the UAE's third-biggest bank, also reported a 16 percent drop in fourth-quarter profit on Monday, hurt by an increase in impairment charges.

Emirates NBD said it expected the Expo 2020 world fair to support multiple sectors in Dubai, but a softening real estate market remained a risk for 2020.