Banks face tougher times as caution grips lending |
|
Tuesday, Dec 02, 2008
Gulf News
Dubai: Though the apparent lack of funding is hitting the banking sector, the indirect impact related to the downturn in the property market is a greater issue, a report released by EFG-Hermes said.
The property market is expected to face even harsher times, as prices weaken due to a strong US dollar.
With local banks having a high exposure to the falling real estate market, even with a low mortgage exposure, a further downturn is expected.
Many developers rely heavily on bank finance. With the existing gloom over the sale of property and cancellation of projects, the banks will face the brunt of the crisis.
"Property-related income is likely to go into arrest. In general, we will assume a 30 per cent mark down on property in estimating any losses," the report said.
Falling assets prices negatively affect all capital market revenue streams, including trading, investment and asset management.
"Many banks also have direct property exposure which will now have reduced revaluation upside or increased revaluation downside," the report said.
Raju Menon, managing partner of investment advisory firm, Morison Menon Chartered Accountants, said bankers will now be cautious, even after a certain level of recovery.
"This is a lesson for bankers here. They have to be more cautious and cannot continue financing the same way as they did before," Menon said.
Though the banks had low mortgage exposure, the current crisis will impact their financing decisions in the future, Menon added. "Premium financing will not happen. Banks will be more cautious with lending even after the situation improves. Rates will come down," he said.
According to the report, the risks taken by the property investors will prove to be a limiting factor in the recovery of the market.
"The chain of activity and money flow are now broken in the banking market. Linking it back will take a long time, unless an external force pumps in money. This is what the government needs to do," said Menon.
© Gulf News 2008. All rights reserved.
Comment on this article 
Loading ...-
Zawya encourages you to add a comment to this discussion. You agree that when you add content to this discussion your comments will not:
1.1 Contain any material which is libelous or defamatory of any person, is obscene, offensive, hateful or inflammatory or causes damage to the reputation of any person or organisation.
1.2 Promote sexually explicit material, violence, discrimination based on race, sex, religion, nationality, disability, sexual orientation or age or any illegal activity.
1.3 Be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence.
1.4 Be threatening, abuse or invade another's privacy, or cause annoyance, inconvenience or needless anxiety.
1.5 Be used to impersonate any person, to misrepresent your identity or affiliation with any person, or be likely to deceive any person.
1.6 Give the impression that they represent Zawya.
1.7 Advocate, promote or assist any unlawful act such as (by way of example only) copyright infringement or computer misuse. - The content posted on www.zawya.com is created by members of the public. The views expressed are theirs and unless specifically stated are not those of Zawya. Zawya reserves the right to review all comments prior to posting and edit or delete any contribution, but Zawya is not responsible for and can not be held liable for any content posted by members of the public on www.zawya.com.
- Zawya is not responsible for the availability or content of any third party sites that are accessible through www.zawya.com. Any links to third party websites from www.zawya.com do not amount to any endorsement of that site by Zawya and any use of that site by you is at your own risk.
- By submitting your comment, you hereby give Zawya the right, but not the obligation, to post, air, edit, exhibit, telecast, webcast, re-use, publish, reproduce, use, license, print, distribute or otherwise use your comments worldwide, in perpetuity.
Stories
Companies
| Company Name | Country | Industry |
| Consolidated Contractors Company | Overseas | Construction and Design |
| Saudi Binladin Group | Saudi Arabia | Construction and Design |
| Emirates Aluminium Company | UAE | Metal Production |
| Abu Dhabi Investment Council | UAE | Investment Firms and Funds |
| Emirates Telecommunications Corporation | UAE | Telecommunications Services |
| Al Azizia Panda United Company | Saudi Arabia | General Retailers |
| Barwa Real Estate Company | Qatar | Landlords and Developers |
| Nissan Motor Egypt | Egypt | Transportation Products |
| Ras Girtas Power Company | Qatar | Electric Utilities |
| Saudi Electricity Company | Saudi Arabia | Electric Utilities |
Projects
| Project Name | Country | Sector |
| Ras Girtas Power Company - Ras Girtas IWPP | Qatar | Power and Water |
| IGD - Gasco - Habshan 5 Gas Processing Plant | UAE | Oil and Gas |
| SATORP - Jubail Refinery and Petrochemical Complex | Saudi Arabia | Oil and Gas |
| Emirates Aluminium (EMAL) - Smelter Complex | UAE | Industry |
| Takreer - Ruwais Refinery Expansion | UAE | Oil and Gas |
| Qatar Foundation - Sidra Medical and Research Center | Qatar | Real Estate |
| Aramco/Dow Chemical - Ras Tanura Integrated Refinery and Petrochemicals Complex | Saudi Arabia | Oil and Gas |
| Abu Dhabi Ports Company - Khalifa Port and Industrial Zone (KPIZ) | UAE | Infrastructure |
| SATORP- Jubail Refinery and Petrochemical Complex - Conversion Unit and Sulphur Package (Part 2) | Saudi Arabia | Oil and Gas |
| Dubai RTA - Dubai Metro - Purple Line | UAE | Infrastructure |