Banks In Uae

UAE: rates cut, housing rebound to follow?

The UAE’s increasingly liquid banks are cutting mortgage rates as they look to claw their way back to growth.

The country’s housing markets, especially in Dubai, have been taking a beating for a few years, with prices falling dramatically as supply outpaced demand. Could the easier availability of mortgage finance boost those anemic housing markets?

Don’t get too excited, analysts say.

The rate cuts reflect banks’ improving confidence that the fall in real estate prices will continue to slow in Abu Dhabi and Dubai.

But still to come onto the market is an influx of new-builts that will dwarf the number of homes that could be bought by those tempted by low mortgage rates.

HSBC has cut its rates already a few times this year, driven by a stabilisation of home prices and an uptick in demand from would-be buyers, James Pierson, HSBC’s head of assets and liabilities for the UAE, told beyondbrics.

“There’s an improved credit outlook that has been driven by own management of risk, but … the market conditions are improving as well,” says Pierson.

The banks’ move to cut rates could be interpreted in two ways.

On one hand, the cuts could be taken as a sign that banks are increasingly confident in the quality of the assets on their books after non-performing loans ballooned during the financial crisis, said Murad Ansari, a banking analyst with EFG-Hermes.

On the other hand, they can also be seen as a sign that banks in the UAE are struggling to find ways to grow their loan books. Corporate demand for credit remains low, and new regulations that limit consumer lending takes a bite out of some banks’ profits there.

With liquidity on the up, overnight intrabanks rates have fallen. Deposits are up from Dh1057bn in January to Dh1128.3bn in April, making mortgage lending an avenue for growth.

Mortgage lending is not expected to boom given the still-weak housing market and local preference for buying homes with cash, yet the cuts in rates are rare green shoots for banks and builders. Small green shoots, but green shoots nonetheless.

Khaleej Times Online - New chairmen for two Dubai banks

Al Tayer, who remains Governor of the Dubai International Financial Centre, has been the chairman of Emirates NBD since its formation in October 2007 following the merger of Emirates Bank International and National Bank of Dubai. Al Tayer is a former UAE Minister of State for Finance and Industry and was also the chairman of Emirates Bank from 1983 until its merger in 2007. Hisham Abdullah Al Kasem was named deputy chairman of Emirates NBD, while Mohammed Obaid Al Shehhi, Mohammed Hadi Ahmed Abdullah Al Husaini and Shoaib Mer Hashim Khouri were appointed as its board members, WAM reported. They replaced Eissa Saleh Al Gurg, Fardan Ali Al Fardan, Khalid Jassem bin Kalban, Abdullah Ahmed Lootah and Hamad Mubarak Bu Amim. “Revamping the board of Dubai’s largest bank by market value could show the government is setting its sights on changes within the emirate’s banking sector,” Reuters quoted Abdul Kadir Hussain, chief executive of Mashreq Capital as saying. “People change senior management and board because they want things to move in another strategic direction,” Hussain was quoted as saying. In 2011 first quarter, Emirates NBD’s profit surged 27 per cent, boosted by gains from an asset sale. In December, Emirates NBD agreed to sell a 49-per cent stake in payments solutions provider Network International to private equity firm Abraaj Capital, a transaction that was completed during the first quarter. The bank said it booked a gain of Dh1.8 billion from the stake sale.

UAE, a MEED practical guide

The Report: Abu Dhabi 2010

The Report: Sharjah 2008

The Report: Ras Al Khaimah 2010

Doing Business and Investing in United Arab Emirates Guide