Asset quality of foreign banks fell last year
Dubai | By C.L. Jose | 08-07-2001
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The asset quality of foreign banks worsened in 2000 from the previous year.
While only Habib Bank AG was able to reduce the ratio of non-performing loans
to gross loans and advances, that of Habib Bank Ltd is stuck at an alarming
80 per cent, according to a report.
However, the scenario among national banks is comparatively better, although
Mashreqbank and Abu Dhabi Commercial Bank still have a high ratio of non-performing
loans to gross loans and advances, with Mashreqbank's being as high as 20 per
cent.
These are the findings of a KPMG analysis which compared the trends in the financials
of the banks last year, which it said was a good year regarding profitability,
especially the foreign banks operating in the country. Almost all national banks
maintained profitability growth, and some foreign banks were able to make an
impressive turnaround.
The KPMG analysis shows that this is particularly true with National Bank of
Abu Dhabi (NBAD) which reversed the trend last year to post a high growth in
profitability. In the case of foreign banks, HSBC still maintains the lead in
profitability, leaving Standard Chartered Bank (SCB) a distant second, but banks
like Citibank, and SCB made a U-turn from the previous year to post a reasonably
good profit before tax (PBT).
The black patch in the foreign bank segment is that of Standard Chartered Grindlays
Bank Ltd and Habib Bank Ltd which remain in the red. Among the larger national
banks, Mashreqbank managed to arrest the downward trend in 1999, it could not
do much to improve profitability in 2000.
While almost all foreign banks were able to post higher growth in net interest
income with the exception of leading banks HSBC and Citibank (Citibank posted
negative growth in interest income for two years in a row), almost all national
banks failed to revive the net interest income growth with the exception of
NBAD and Emirates Bank International. National Bank of Dubai (NBD) which maintains
a relatively small loan portfolio made negative growth in net interest income
during 2000.
Another important trend was that the net loans and advances as part of total
assets shrank for almost all banks. Among foreign banks, only Habib Bank AG
witnessed growth in the ratio of net loans and advances to total assets. The
case is the same with almost all national banks with the exception of Abu Dhabi
Commercial Bank (ADCB).
While there was a shrinkage in customer deposits with NBAD and EBI, the growth
in customer deposits posted by Union National Bank (UNB) was relatively less
in 2000 compared with that of the previous year. The performance of foreign
banks in general was not impressive, although HSBC managed a substantial growth
in customer deposits during 2000.
Many banks witnessed poor growth in loan offtake. Only NBAD and ADCB among the
national banks, could improve the growth rate in the ratio of net loans and
advances to customer deposits during 2000. The study did not provide detailed
figures.
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