Dubai's Mashreq sees lower bank sector growth

Dubai’s Mashreq sees lower bank sector growth

Global financial concerns hit recovery in banking sector – CEO; Sector may see 10-15 pct profit growth in 2012; No bond plans in 2011, may issue bond in H2 2012

October 4, 2011 2:43 by Reuters

Mashreq Bank , Dubai’s second-largest lender by market value, now expects lower profit growth for the UAE banking sector than at the start of the year as global economic worries hamper recovery, its chief executive said on Tuesday.

“I’m saying for the entire banking sector and including us of course,” said Abdul Aziz Al Ghurair.

Local banks were badly hit by the 2008 global financial crisis and a property bust, particularly in the UAE.

Gulf banks spent more than $20 billion on loan loss provisions and investment impairments between 2008 and 2010 according to Standard & Poor’s.

“We were expecting recovery to be faster. What’s happened around the world has pulled down the economy,” Al Ghurair told reporters on the sidelines of a conference. “Two thousand and eleven is about stabilising the profitability of banks and I think 2012 is a year for takeoff.”

Al Ghurair added that 10 to 15 percent growth in net profit for the UAE banking sector may be possible next year.

Growing expectations of a sovereign debt default in Greece has increased fears of another global recession.

The bank chief said in earlier remarks during the conference that bottomline growth will be lower than expected in the absence of strong economic growth.

Mashreq reported a 41 percent increase in second-quarter net profit in July, as half-year provisions for bad loans fell.

Al Ghurair said the company has no immediate plans to issue a bond this year but is considering a bond issue in the second half of 2012.

“We have enough liquidity and our capital adequacy is at 22 percent. There is no reason (to issue a bond). If we do it, it’s just to stay in the market,” he said. (Reporting by David French; Writing by Shaheen Pasha; Editing by Amran Abocar)