Finance

Eurozone woes deepen; Abu Dhabi banks in focus

Renewed worries over the euro zone are likely to weigh on Gulf sentiment on Wednesday, while estimate-beating results by Abu Dhabi banks may do little to attract new buyers. Asian shares are down as soaring borrowing costs deepened concerns Spain might need a bailout, while Greece appeared unlikely to meet terms conditional to its aid package. In the UAE, Abu Dhabi Commercial Bank reported a second-quarter profit of AED733m (US$199.6m), topping forecasts after the lender took lower provisions. National Bank of Abu Dhabi, the UAE's largest lender by market value, reported a 2 percent rise in quarterly profit, meeting forecasts. First Gulf Bank edged higher on Tuesday after it posted a 14 percent rise in second-quarter profit, beating expectations. "Some banks are witnessing tighter margins due to the low interest rate environment, others are reducing loan loss provisions as a result of higher asset quality," says Sleiman Aboulhosn, assistant fund manager at Al Masah Capital. "Overall, I think the small earnings beat is unlikely to have a pronounced effect on stock prices this week. Volumes have plummeted as many investors are absent and the market lacks momentum, so we hesitate to day-trade in this environment." Trading slumps on Gulf markets in the summer as many participants escape the searing heat, while the Muslim holy month of Ramadan, which started on Thursday evening, exacerbates the lack of investor interest. In Doha, Vodafone Qatar posted a narrower quarterly loss, beating an analyst forecast. Source: Reuters

ADIB first UAE bank to launch in Iraq

Abu Dhabi Islamic Bank (ADIB), the UAE’s second- biggest Shariah-compliant bank, has become the first lender in the country to establish a branch in Iraq, it was announced on Wednesday. The ADIB branch is located at Baghdad and marks the first UAE-based financial institution to receive a full operations banking license from the Iraqi Central Bank. Unveiling the expansion plans, Tirad Al Mahmoud, CEO said: "Iraq has been on our agenda for some time now and we believe that this is the opportune time to launch our presence there. The country is on a comeback trail, business conditions have improved considerably, and it's the right time to get in. Its vast oil reserves, a great rebuilding and infrastructure development effort, and a growing population present great opportunities for growth. We aim to play a pivotal role in the development of its economy." ADIB was also granted approval from Central Bank of Iraq to confirm Iraq oil export letters of credit issued by multinational oil corporations, multinational commodities and oil traders and financial institutions that issue letters of credit on behalf of their clients. "Our challenges are clear. We aim to increase the private sector banks' share of the Iraqi market from the current level of less than 20 percent and to develop the Islamic banking industry there," Tirad added. Established in May 1997 as a Public Joint Stock Company, ADIB’s net profit for the first quarter of 2012 was AED307.3m (US$83.6m), an increase of 1.4 percent. Net profit announced for 2011 was AED1.16bn, an increase of 13 percent. Source: ArabianBusiness

UAE hosts board meeting of top bank

The UAE recently hosted today the second 2012 board of directors meeting for the Arab Bank for Economic Development in Africa. Obaid Humaid Al Tayer, the Minister of State for Financial Affairs at the UAE Ministry of Finance, inaugurated the meeting, while Yousef Bin Ibrahim Al-Bassam, chairman of the Bank, led the discussions. The meeting was attended by Abdul Aziz Khalaf, director general of the bank, with the participation of the bank’s board of directors. The UAE, represented by Mohammed Obaid Al Mazroui, is considered one of the board’s permanent members due to its contribution to the bank’s capital over the years. The meeting covered the director general’s report on the bank's activities and achievements between January and end of April. In addition, it highlighted key points from the bank’s investment portfolio such as its financial and performance reports during this period. It was also confirmed that the bank has approved funding loans for several beneficiary African countries. “The Arab-African relationship is a model of solidarity based on strategic depth and trust. Additionally, it is one of the parameters established to support joint Arab action and to promote cooperation with other countries, specifically ones from the South,” said Al Tayer. “The UAE appreciates the Bank taking into account the circumstances of the beneficiary countries when providing funding by facilitating the lending terms and conditions. This action has reflected positively on the Bank’s reputation worldwide, gave its financial offerings a competitive advantage, and has resulted in creating long-lasting relationships with the beneficiary countries. “The UAE also values the Bank’s position in highlighting the role played by Arab states and financial institutions to support the overall development of African countries,” he added. Source: TradeArabia News Service

Bahrain bonds “boost investors’ confidence”

The success of Bahrain's recent $1.5 billion bond issue is a major boost to global investor confidence in the kingdom, said top financial executives at a roundtable hosted by the Bahrain Association of Banks (BAB). Bahrain's first conventional bond issue in two years was oversubscribed by 400 per cent with bids from US, Europe and Asia. "Oversubscription is a continuing sign of investor confidence in the region and Bahrain as a sovereign issuer," said Central Bank of Bahrain (CBB) adviser Richard Ellis speaking at the roundtable held at the Diplomat Radisson Blu Hotel, Residence, and Spa. Bahrain's credit rating is not likely to face any further downgrade, he said. "Credit rating agencies downgraded the kingdom because of political concerns, not because of poor revenues," he pointed out. "We have had useful meetings with those agencies recently," he said. "They have not suggested any further downgrade but they have not indicated an upgrade either," he added. Credit rating agencies have adopted a cautious approach when it comes to revising the status of most economies, he said. "They consider themselves partly to blame for the financial crisis. So they are reluctant to upgrade immediately," Ellis added. Bahrain's banks are unlikely to be affected by the crisis in the euro zone, a top banking official told the meeting. "We don't have figures for the exposure of Bahrain banks to the euro zone," said BAB chairman Abdulkarim Bucheery. "We were blessed to have thought about redirecting investment from abroad into the region in the wake of the 2007 crisis," said Bucheery, who is also BBK chief executive. "Most banks focused back on Bahrain and neighboring countries and BBK has no exposure to Europe and Bahrain banks have very little exposure. Financial results of banks for the first-half of this year show a positive outlook for the sector," he added. "Credit extension in the country has grown. Growth on year-to-year has increased by five per cent on loans in the retail sector and is much higher in the corporate sector," he added. Bahrain is keen to reach out to the East, said BAB chief executive Robert Ainey, while discussing plans for a major event for the association at the IMF/World Bank conference in Japan. BAB is set to host a reception during the conference in Tokyo. "In the past we saw the direction focused on Western economies, so it's good to see them looking towards the East," he added. Ellis said the CBB would be discussing Basel 111 and capital adequacy ratios with the banking sector after Ramadan. However, Bahrain was under no pressure to meet the new regulations meant to come into effect for signatories to the agreement by January next year, he added. Source: TradeArabia News Service

Gulf markets take a dip with Ramadan lull

Dubai Gulf Arab markets dipped into negative territory on low volumes yesterday as investors, focused on the Muslim holy month of Ramadan, and avoiding the region's searing summer heat, stayed away from trading and global cues failed to inspire buying. In Oman, the Muscat index dropped for the fifth session in succession to a fresh three-year low, dragged down by banks. The bourse ended down 0.2 per cent yesterday. Kuwait's index dropped to its lowest level since January 11, with the 0.7pc fall its sixth decline in the last seven sessions. In Saudi, the index slipped marginally into the red in the final trading session of the week, but Saudi Arabian Fertilizers Co (Safco) continued its recent advance to close at a 15-week high. Dubai dropped 0.3pc to its fourth decline in five sessions, with volumes at their lowest since January 1, while Qatar dipped 0.2pc, down for a third session. The only index to rise in the region is Bahrain. The index gained 0.2pc, having hit its lowest level since April 2003 the previous day. Source: AlBawaba

Banks hog at least half of commercial space in UAE downtown development

The Galleries is home to five international banks – HSBC, Standard Chartered Bank, Citibank, Abu Dhabi Commercial Bank and Blom Bank France – occupying 12,000 sq. ft. between them. More bank leases currently under negotiation are set to bring the total space taken by banks to more than 18,000 sq. ft. Bahaa Abouhatab, Head of UAE Projects for Limitless, said: “International banks are drawn to The Galleries’ strategic location, easy transport links, and ever-increasing office tenants. Banks here are visible from Sheikh Zayed Road, and are convenient for passing motorists and people in nearby areas such as Jafza and Dubai World Central who can easily call in to The Galleries to take care of banking business. This is in addition to serving 2,500 people who work for 60 Galleries-based global and local companies.” The Galleries is an eight-building mixed-use development set among landscaped, communal grounds spanning 215,000 sq. feet – equivalent to three international football pitches. Less than an hour by car from Abu Dhabi and directly accessed from Sheikh Zayed Road direct road or by its own onsite Dubai Metro station, The Galleries has 2,500 parking spaces as well as onsite Facilities Management and Tenant Relations teams. Source: AlBawaba

Could the GCC form a single currency?

During April 2012, a queue of thousands of trucks built up at the Al Ghuwaifat border crossing between the United Arab Emirates and Saudi Arabia, because of a slow customs clearance process. This incident underlined the difficulties faced by the six rich oil exporting countries of the GCC. Saudi Arabia, the biggest Arab economy, is leading moves towards political and economic cooperation, which it believes would give the Gulf States more power to withstand any confrontation with Iran. Closer business ties within the GCC, which consists of Saudi Arabia, the UAE, Kuwait, Qatar, Oman, and Bahrain and has a combined annual output of about $1.4 trillion, could have big repercussions for companies and consumers. Projects already underway or under study include a customs union, a joint value-added tax, and even the introduction of single currency. "They have the deadline of 2014 to finish everything. Distribution of customs revenues is the main thing, said a Gulf official familiar with the process. "It's more about how to solve it, the distribution, and rates. Options include dividing revenue from customs according to the level of imports, population, or the share of gross domestic product of individual countries, a GCC official said. Labor movement is free for GCC citizens, but this is less important than it might seem since so many workers in the Gulf are expatriates, brought in to man oil rigs and retail and service businesses. Source: AlBawaba