U.A.E. Banks Non-Performing Loans Have Peaked, Central Bank Says

Non-performing loans at United Arab Emirates’ banks are falling, five years after the second-biggest Arab economy had one of the world’s worst property crashes.

The ratio of bad loans, or those that have been unpaid for more than 90 days, to combined gross loans at the U.A.E.’s 51 banks was at 8.4 percent at the end of December, the Abu Dhabi-based central bank said today in its financial stability report for 2013. The total value of NPLs began to “gradually decline in the last quarter of 2013 for the first time since 2007” and was at 107 billion dirhams ($29 billion) at year’s end, indicating they had peaked, according to the report.

Average NPLs tend to peak five years after the start of a real-estate crisis, the central bank said, citing research from the International Monetary Fund. Property prices in the U.A.E. fell more than 60 percent from their 2008 peak during the financial crisis as banks cut mortgage lending and speculators fled. They’ve since rebounded.

The U.A.E. economy expanded 5.2 percent in 2013, the fastest pace in six years, according to the National Bureau of Statistics. Residential property prices rose 24 percent in Dubai and 21 percent in Abu Dhabi last year, the central bank said.

The bank is also finalizing new liquidity regulations for lenders and expects to issue them in the second-half of 2014, it said. Under the rules, U.A.E. banks will be required to hold “sufficient liquid assets of the highest quality” to help withstand market disruptions, it said.

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