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Mashreq Bank’s price estimate was reduced to Dh101.41 from Dh123.
“We expect the growth rate of the bank to slow down considerably in the coming years, in contrast with high growth rates achieved in the past years,” said GIH.
The global economic meltdown has shaken Dubai’s non-oil growth drivers like real estate, construction, tourism and retail. GIH said it was concerned about the deteriorating quality of assets, especially in Dubai where the economic slump has hit hardest.
“We have started to see some impact as gross non-performing loans as a percentage of gross loans have gone up in the first quarter. Though Mashreq Bank has been conservative in its approach, we are a bit concerned about the high retail exposure of the bank in the current scenario.”
Mashreq’s retail banking segment has the highest contribution to the total operating income. Operating income from the retail banking business increased by 24.6 per cent to Dh1.5 billion in 2008 which represented around 38 per cent of total operating income. The contribution of corporate banking business to the group profit was Dh1.2 billion, up 7.6 per cent from 2007.
But then with companies downsizing operations due to the meltdown, “Dubai has witnessed significant job losses over the past few quarters, and this might impact the retail portfolio of the bank,” said GIH.
GIH said lending growth has been strong for the bank, as well as management of its non-performing loans. The gross non-performing loans has in fact, declined from Dh383.1 million in 2007 to Dh364.2 million in 2008. On the other hand, Mashreq’s non-performing loan ratio has improved to 0.6 per cent in 2008 from 1.1 per cent a year ago.
“However, we expect this ratio to go up in the coming months on account of deterioration in the economic scenario,” said GIH—rocel@khaleejtimes.com
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