Emirates NBD PJSC’s impaired loans ratio would drop by a quarter if the biggest bank in the United Arab Emirates reclassifies its loans to Dubai World as performing, according to Arqaam Capital Ltd.
The bad loans ratio would improve by 3.6 percentage points to 10.3 percent if the change was made, Arqaam said in a research report dated yesterday. That would allow funds set aside by the bank to cover 77.9 percent of bad debts compared with 57.5 percent today, close to Emirates NBD’s 80 percent target. The bank’s loan-loss provision shortfall would decline to 600 million dirhams ($163 million) from 8.1 billion dirhams, according to the report.
Emirates NBD is one of the biggest lenders to Dubai World and other state-controlled entities in the emirate, and was hurt after the global credit crisis forced them to delay debt payments. Dubai World owes the bank 9.4 billion dirhams, against which the bank has set aside 458 million dirhams to cover losses, according to the bank’s quarterly results presentation.
Dubai World, one of the emirate’s three main state-owned holding companies, will be able to repay the $4.4 billion due to creditors in September 2015, Mohammed Al Shaibani, director general of the Dubai Ruler’s Court said April 7. Dubai World, which owns ports operator DP World Ltd. and ship repair company Drydocks World LLC, reached a deal with about 80 creditors in March 2011 to delay payments on $14.7 billion of loans. Of that, $4.4 billion is due in 2015 and the rest in September 2018.