SMEs in the UAE are back on track, says Commercial Bank of Dubai chief

The worst of the debt crisis that plagued small- and medium-size enterprises in the UAE in the aftermath of the oil price crash is behind us as the economy improves, according to Bernd Van Linder, the chief executive of Commercial Bank of Dubai (CBD).

As a result, the executive expects loan growth in the banking industry to grow between 2 per cent to 5 per cent this year following a lacklustre growth last year, the executive said.

“When you look at the banking sector, we’re in reasonably good shape because the economy will grow about 4 per cent,” Mr Van Linder said.

“I think 2 per cent to 5 per cent should be feasible. When you look at the banks, the capital position is fine, liquidity position is fine, provisions are improving. It’s clear that the situation on non-performing loans is getting better. The bulk of the pain is behind us.”

However, the Dutch executive said that while the overall money set aside to cover bad debt was decreasing that it was still increasing at some lenders including CBD because of aggressive lending at the time of the oil price crash in 2014. CBD said on April 20 that its net profit dropped by 33.5 per cent in the first quarter as a sharp rise in money set aside to cover bad debt outweighed gains in interest income

Net profit dropped to Dh160.1 million in the first three months of the year compared with Dh240.8m in the same period last year, the bank said. Impairment allowances on loans and advances and Islamic financing increased 78.5 per cent to Dh256.7m in the first three months of the year from Dh143.8m in the same period last year, it said.

Net interest income and net income from Islamic financing rose, however, 5.65 per cent to Dh430m from Dh407m, the bank said.

The bank joins a number of other smaller banks that have been weighed down by an increase in provisions over the past couple of years. The executive demurred from giving a breakdown of which segment had been stressed the most, but small and medium-sized enterprises have given banks the biggest holes in balance sheets in recent years.

“I would say that the second quarter will show more of the same but for the sector as a whole, I would say the sector is improving,” said Mr Van Linder, who was appointed chief executive in January.

The executive is not the only one to notice signs of improvement in the UAE banking industry. Standard Chartered said last week that it is seeing signs of recovery in its UAE retail banking business as credit card spending rebounds and demand for mortgages grows, after a number of difficult years marked by job losses and low consumer confidence.

Dubai’s Mashreq Bank said last month that it, likewise, has noticed a pick up in credit card issuances and spending since the beginning of the year.

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