Debt write-offs lead to loss at CBI

The Dubai-based lender Commercial Bank International said it booked a loss last year after it more than halved its non-performing loans by writing off a big chunk of bad debt.

The lender’s chief executive Mark Robinson said that he expects this year to be challenging as the economy continues to slow amid the biggest drop in oil since 2008.

The bank said after the stock market closed yesterday that it booked a loss of Dh466.6 million after it reduced its non-performing loans by Dh1.38bn to Dh983m last year. The bank did not break out fourth quarter earnings, but Mr Robinson said most of the reduction in non-performing loans was done during the fourth quarter of last year when the drop in the price of oil was the steepest.

CBI’s 2014 profit fell to Dh133.5m from Dh176.6m in 2013. Qatar National Bank, the bank’s biggest shareholder, has a 40 per cent stake in CBI.

While the move to drastically cut non-performing loans, which was also done by increasing provisions and upgrading some troubled loans, allows the bank to grow its balance sheet without being haunted by old bad debts, there may not be much respite for lenders this year as the price of oil, the region’s main engine of economic growth, continues to languish.

“This is going to be a challenging year. It will be volatile,” said Mr Robinson.

“Our performing loans, we will be working very hard with our existing clients to support them, and at the same time look after the interests of the banks.”

Mr Robinson added: “We’re looking at having a significant reduction in provisions this year from last year.”

Since the middle of 2014, the price of oil has shed more than 70 per cent of its value as slowing global economic growth reduces demand and the supply of crude increases. And as oil continues to plummet, the outlook for the economy is likely to remain bleak with many banks starting to report rising levels of money set aside to cover bad debts, especially those coming from small- and medium-sized companies.

Abdul Aziz Al Ghurair, the chairman of the UAE Banking Federation, warned in November that a number of small business owners might have fled the country this year, leaving unsettled debts of about Dh5bn.

Mr Robinson said small businesses make up a small portion of CBI’s loan book but that the bank was working with struggling businesses to help them get through the rough patch.

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