24 September 2009
Financial services provider Credit Suisse has said it expects the credit crisis to end by late 2010.
Investors in the banking sector, it said, can look forward to the "next big thing" as the sector moves from liquidity crisis to credit cycle.
Upgrading its 12-month target prices for UAE banks, Credit Suisse also upgraded its ratings on Dubai Islamic Bank (DIB) and National Bank of Abu Dhabi (NBAD).
"We think investors should, looking one year ahead, be positioned for the next big thing in the sector," said research analyst Mohamad Hawa.
Positive news is expected to bring cheer to investors in UAE banks as the sector moves from liquidity crisis into credit cycle. As the credit crisis ends, investors would be able to ask for a normalised risk premium, said the report.
The "significantly wider" margins enjoyed by the sector in the first half of this year, however, are unlikely to continue, it said.
Balance sheet expansion would become more difficult as easy funding from government injection of liquidity - including Tier 1 capital notes in Abu Dhabi, Tier 2 subordinated debt and dirham-dollar swap facility - has already played out, while pure customer deposits remain flattish, said Credit Suisse. Besides, credit costs are likely to speed up in the second half, it said.
The recent rally in UAE banks' shares was due to "increasing investor confidence in the ability of the banks to weather the liquidity crisis", it pointed out.
The new target prices for DIB and NBAD provide an average of 22 per cent upside potential to current prices, said the report.
Financial services provider Credit Suisse has said it expects the credit crisis to end by late 2010.
Investors in the banking sector, it said, can look forward to the "next big thing" as the sector moves from liquidity crisis to credit cycle.
Upgrading its 12-month target prices for UAE banks, Credit Suisse also upgraded its ratings on Dubai Islamic Bank (DIB) and National Bank of Abu Dhabi (NBAD).
"We think investors should, looking one year ahead, be positioned for the next big thing in the sector," said research analyst Mohamad Hawa.
Positive news is expected to bring cheer to investors in UAE banks as the sector moves from liquidity crisis into credit cycle. As the credit crisis ends, investors would be able to ask for a normalised risk premium, said the report.
The "significantly wider" margins enjoyed by the sector in the first half of this year, however, are unlikely to continue, it said.
Balance sheet expansion would become more difficult as easy funding from government injection of liquidity - including Tier 1 capital notes in Abu Dhabi, Tier 2 subordinated debt and dirham-dollar swap facility - has already played out, while pure customer deposits remain flattish, said Credit Suisse. Besides, credit costs are likely to speed up in the second half, it said.
The recent rally in UAE banks' shares was due to "increasing investor confidence in the ability of the banks to weather the liquidity crisis", it pointed out.
The new target prices for DIB and NBAD provide an average of 22 per cent upside potential to current prices, said the report.
By Shveta Pathak
© Emirates Business 24/7 2009
