The extra money set to inject in the banking system may prove insufficient.
The extra money set to inject in the banking system may prove insufficient.

Doubts grow over Dh70bn injection



Doubts are growing over whether the Government's pending injection of Dh70 billion (US$19.05bn) into the banking system will be enough to easy the credit crunch that has hit UAE companies. Analysts say the extra money, which is expected to be deposited in banks by the Government, is likely to shore up confidence in the banking sector, but may be insufficient to prevent a sharp decline in loan growth, which would weigh down the economy. Loan growth may slow to between 20 per cent and 25 per cent during the next four quarters, from about 50 per cent in June, even with the emergency injection, according to Raj Madha, a banking analyst at EFG-Hermes. "The large corporate sector would be the most likely place that would feel it, because it's the least profitable area of lending for banks and it's the place where the international cross-border banks have been most active." Over the past decade, companies in the UAE, including some leading names, have financed much of their rapid growth by borrowing directly from abroad or domestic banks that, in turn, tapped the international markets for funds. Domestic bank lending has increased by an average of 35 per cent a year over the past four years in the UAE, making it the only country in the GCC where value of loans exceeded deposits as of June, according to ratings agency Standard & Poor's. Now, with international lenders unwilling to lend, UAE banks have been left struggling to satisfy the country's demand for corporate and government financing almost entirely on their own. According to Mr Madha, the Government's move to inject funds into the banking system should replace a large portion of international funding and shore up confidence in the banking sector. With more than $15 billion in large corporate loans coming due by the end of this year, according to Merrill Lynch, there has been increasing worry over whether the government will take steps to ensure that such entities continue to be able to access funding. However, as some banks struggle to balance out their loan books and deposit base, they could decide to hold on to the extra government money. Western economies such as the US and Europe have similar concerns that their banks will choose not to expand lending as aggressively as needed by the economies. In the UAE, banks will have an incentive to lend because they probably will have to pay interest on the government funds. Choosing not to re-lend would cut into banks' profit margins. The UAE's more healthy banks are likely to re-lend the government money, in order to gain some revenue from it. But others could choose to hoard the funds if the value of loans they have made gets too far ahead of the deposits they have on hand to support those loans. In such a case, the government may have to use its powers of "moral suasion" to pressure banks to put the funds to use in the wider economy, according to a Saudi banker. The fact that the Government owns large stakes in many banks would give extra leverage, he said. Although the Government has declined to release any specifics on how the Dh70bn injection will work, bankers expect the Ministry of Finance and Industry to distribute it in the form of direct deposits. Among the questions still being asked is whether the ­Government will divide up the funds between banks according to their size, or according to their need. Today, Dubai-based mortgage providers Amlak Finance and Tamweel, two large government-related corporations who recently entered merger talks, announced that they were taking special measures to secure ­funding. According to a joint statement posted on the Dubai bourse website, the two entities were working with the government "to arrange access to liquidity and funding alternatives, to the extent necessary, to fulfil ongoing business plans". The three-month Emirates interbank offer rate (Eibor), which tracks how much banks charge each other for short-term funds, has more than doubled since June, a sign of how tight funding has become in the country. Today, it reached 4.65 per cent, down from 4.66 on Friday. tpantin@thenational.ae

INDIA SQUADS

India squad for third Test against Sri Lanka
Virat Kohli (capt), Murali Vijay, Lokesh Rahul, Shikhar Dhawan, Cheteshwar Pujara, Ajinkya Rahane, Rohit Sharma, Wriddhiman Saha, Ravichandran Ashwin, Ravindra Jadeja, Kuldeep Yadav, Mohammed Shami, Umesh Yadav, Ishant Sharma, Vijay Shankar

India squad for ODI series against Sri Lanka
Rohit Sharma (capt), Shikhar Dhawan, Ajinkya Rahane, Shreyas Iyer, Manish Pandey, Kedar Jadhav, Dinesh Karthik, Mahendra Singh Dhoni, Hardik Pandya, Axar Patel, Kuldeep Yadav, Yuzvendra Chahal, Jasprit Bumrah, Bhuvneshwar Kumar, Siddarth Kaul

Jigra
Director: Vasan Bala
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
Rated: 3.5/5
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Afcon 2019

SEMI-FINALS

Senegal v Tunisia, 8pm

Algeria v Nigeria, 11pm

Matches are live on BeIN Sports

COMPANY PROFILE
Name: Airev
Started: September 2023
Founder: Muhammad Khalid
Based: Abu Dhabi
Sector: Generative AI
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
 
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How to volunteer

The UAE volunteers campaign can be reached at www.volunteers.ae , or by calling 800-VOLAE (80086523), or emailing info@volunteers.ae.

Quick%20facts
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It’ll be summer in the city as car show tries to move with the times

If 2008 was the year that rocked Detroit, 2019 will be when Motor City gives its annual car extravaganza a revamp that aims to move with the times.

A major change is that this week's North American International Auto Show will be the last to be held in January, after which the event will switch to June.

The new date, organisers said, will allow exhibitors to move vehicles and activities outside the Cobo Center's halls and into other city venues, unencumbered by cold January weather, exemplified this week by snow and ice.

In a market in which trends can easily be outpaced beyond one event, the need to do so was probably exacerbated by the decision of Germany's big three carmakers – BMW, Mercedes-Benz and Audi – to skip the auto show this year.

The show has long allowed car enthusiasts to sit behind the wheel of the latest models at the start of the calendar year but a more fluid car market in an online world has made sales less seasonal.

Similarly, everyday technology seems to be catching up on those whose job it is to get behind microphones and try and tempt the visiting public into making a purchase.

Although sparkly announcers clasp iPads and outline the technical gadgetry hidden beneath bonnets, people's obsession with their own smartphones often appeared to offer a more tempting distraction.

“It's maddening,” said one such worker at Nissan's stand.

The absence of some pizzazz, as well as top marques, was also noted by patrons.

“It looks like there are a few less cars this year,” one annual attendee said of this year's exhibitors.

“I can't help but think it's easier to stay at home than to brave the snow and come here.”

Indoor Cricket World Cup

Venue Insportz, Dubai, September 16-23

UAE squad Saqib Nazir (captain), Aaqib Malik, Fahad Al Hashmi, Isuru Umesh, Nadir Hussain, Sachin Talwar, Nashwan Nasir, Prashath Kumara, Ramveer Rai, Sameer Nayyak, Umar Shah, Vikrant Shetty

COMPANY%20PROFILE%20
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The Perfect Couple

Starring: Nicole Kidman, Liev Schreiber, Jack Reynor

Creator: Jenna Lamia

Rating: 3/5

COMPANY%20PROFILE
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Normcore explained

Something of a fashion anomaly, normcore is essentially a celebration of the unremarkable. The term was first popularised by an article in New York magazine in 2014 and has been dubbed “ugly”, “bland’ and "anti-style" by fashion writers. It’s hallmarks are comfort, a lack of pretentiousness and neutrality – it is a trend for those who would rather not stand out from the crowd. For the most part, the style is unisex, favouring loose silhouettes, thrift-shop threads, baseball caps and boyish trainers. It is important to note that normcore is not synonymous with cheapness or low quality; there are high-fashion brands, including Parisian label Vetements, that specialise in this style. Embraced by fashion-forward street-style stars around the globe, it’s uptake in the UAE has been relatively slow.

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Moon Music

Artist: Coldplay

Label: Parlophone/Atlantic

Number of tracks: 10

Rating: 3/5


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