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S&P adopts promising outlook for UAE banking sector

January 23, 2014

Banks in the United Arab Emirates ( UAE ) have good prospects in 2014 because of healthy economic growth and an upbeat corporate sector, Standard '&' Poor's Ratings Services said on Wednesday, the Gulf Today reported. In an article titled " UAE banking sector outlook 2014: An uptick in lending and economic activity signal continued profitable growth," the S&P said it believed that the banking sector in the UAE has good prospects to prosper in the current year because of healthy economic growth and an upbeat corporate sector. "Real estate prices have been inching upward since late 2012, particularly in Dubai , and banks' credit losses are gradually decreasing," said Standard '&' Poor's credit analyst Engin Timucin . "Over the past six months, we have also seen signs that credit growth is picking up. We expect these trends to provide banks with another year of strong financial performance, and they support our stable rating outlooks in the sector." "We believe the key risk factor to watch over the next 24 months will be developments relating to certain large restructured transactions," Engin added. The article also states that, while the supply of credit continues to increase, it remains to be seen whether banks will manage to avoid the pitfalls that led to problems previously. Still,Standard '&' Poor's thinks asset quality will continue to improve, although the cost of risk is unlikely to reduce further. Banks' robust funding levels and good-quality capital should help them withstand adverse market developments, such as tighter liquidity and higher funding costs. Meanwhile, asset quality of the UAE banks are set to improve over the course of 2014 with the decline in non performing loan (NPL) ratios and improving coverage ratios supported by asset and profit growth, Standard & Poor's said in its UAE banking sector outlook for 2014.Most UAE banks' NPL ratios have been stabilising over the past 12 months, after a significant deterioration in asset quality over the past few years. The banks continue to generate strong pre-provision earnings and increase their coverage of reported NPLs, and the incidence of new NPLs has slowed substantially.; All Rights Reserved - Mubasher Info

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Source: Mubasher (Saudi Arabic)

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