Reports of loan defaults are overblown, says NBAD chief

26/01/2016 06:59 AST

The chief of Abu Dhabi’s biggest bank said non-performing loans (NPL) in the financial system were still at low levels, despite some lenders reporting rising impairments.

He also dismissed fears of rising defaults among small businesses as exaggerated. “NPLs are at very low levels at the moment,” Alex Thursby, the chief executive of National Bank of Abu Dhabi, said yesterday on the sidelines of the 10th GCC Regulators Summit in the capital.

“There will be some stress in the marketplace, but I think it is going to be limited stress,” he said. “Is this going to be a 2008 situation? No way. No way.”

Mr Thursby said that banks were increasingly working with small businesses to address their short-term cash flow issues. The UAE Banks Federation said in November that SME borrowers had defaulted on Dh5 billion worth of debt in the first 11 months of the year, with Emirates NBD noting a rise in SME customers fleeing the country to avoid loan payments.

“There was no reason for some people to be concerned,” said Mr Thursby, ahead of the release of NBAD’s annual results on Thursday.

“If companies have short-term, real cash flow problems … if banks behave and work well together [with companies] they can get over that and I think we are starting to see the banking industry doing that.”

His comments came the day after a UAE central bank survey that tracks demand for loans moved into negative territory during the fourth quarter of last year, the first such reading since the survey began in 2014.

Addressing delegates at the summit, Mr Thursby said that economic growth in China and the wider global economy were of more importance to the region’s financial markets than falling oil prices.

“The fall in oil prices is an emotional issue with regard to capital markets,” he said. “Ultimately, I’m convinced that lower oil prices will improve the economy globally. With lower oil prices there will be losers, no question, but there will be huge winners in the long run.”

The National