Abu Dhabi banks Algosaibi Saad exposure

[sharekiddy]

Dear Memebers
any comment on the below info?

Maktoob Business 30 September 2009:

ADX orders banks to divulge Saudi exposure ...

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLU4508220090930
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In the business world, the rearview mirror is always clearer than the windshield. - "WB"

[sharewadi]

[sharewadi]

Report referred to is a Reuters report, reprinted by Maktoob. Have edited first post with link to original Reuters report which reads as follows:

Reuters 30 September 2009:

Abu Dhabi bourse warns banks on Saudi exposure By Stanley Carvalho Abu Dhabi: The Abu Dhabi Securities Exchange (ADX) has directed banks to provide details of exposure and provisions taken to troubled Saudi groups Saad and Algosaibi as part of regulatory measures, the bourse said on Wednesday. The request led to a flurry of statements by listed banks and comes after the UAE central bank governor said this week that 13 UAE banks were exposed to the troubled Saudi firms. ADX sent out a circular urging banks to provide any exposure details by Sept. 30 or to let ADX know by what date banks can provide those details. "Banks have been responding to our circular but so far no trading has been suspended," Khaled Al Suwaidi, head of the listing companies department, told Reuters. The two Saudi family businesses are undergoing a massive debt restructuring that has sent shockwaves through the regional banking system. Gulf central bankers on Tuesday warned commercial banks not to expect government bailouts of defaulting borrowers. National Bank of Fujairah (NBF) said its exposure to Saudi Arabia's Algosaibi Group was $10.2 million and it also had $15.2 million outstanding with Saad's Bahrain unit, Awal Bank. The bank said it had taken provisions of $3.3 million for Algosaibi and $6.5 million for Awal Bank as of Aug. 31. Bahrain's central bank in July seized Saad's Awal Bank unit and a bank owned by Algosaibi, The International Banking Corporation, saying they had substantial shortfalls of assets relative to liabilities. Meanwhile, Sharjah Islamic Bank (NBS) said its exposure to Saudi Arabia's Algosaibi Group was 55 million dirhams ($15 million), but it had no expsoure to the Saad Group. Three other banks - United Arab Bank (UAB), Rak Bank (RAKBANK) and and Bank of Sharjah (BOS) - said they had no exposure to the two groups. National Bank of Abu Dhabi (NBAD) reiterated its July announcement that it had $7.5 million in exposure to Algosaibi and $3.4 million in exposure to Saad. Last week, Abu Dhabi Commercial Bank (ADCB), the UAE's third largest lender by assets, said it held $609 million in exposure to the Saudi conglomerates, the biggest official disclosure of potential losses against the groups. The ADX made the request of the banks in two circulars on Tuesday, initially instructing banks to provide the information before trading began on Wednesday. A subsequent circular sent later on Tuesday directed banks to provide the details or inform the ADX when banks could provide the required details. (Additional reporting by Tamara Walid and John Irish in Dubai; Editing by Will Waterman)

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[fayesloan]

Saad and Gosaibi debacle as I have mentioned in July on this forum is a taste of things to come for the GCC banking sector. What happens usually when times are good in markets, like right now as all kinds of securities are taking the escalator to the 10th floor from the first, and a very fast escalator at that, is that no one will care about real news. Real news may actually be very bad, as is the case, all across the world, but when things such as stock prices are up and going up, nobody will pay attention to minor news such as 300 banks going under in the USA. There is a disconnect between news and markets right now, but the price will have to be paid at a later date, if not now.
The time will come when news will matter, and when that time comes, if the Governor of the UAE Central Bank cuts his finger gardening, it will send share prices down 5% the next day.
ADX is being very wily with this move described in the article above. ADX knows at this juncture in a very better than expected 2009 for stock markets that no matter what you throw at the public, stocks have upside momentum, so it is great time to force banks to admit what happened already with Saad and Gosaibi.
Will ADX force banks to admit to other problems?
Unlikely.

[Prop]

Venturing in the area of speculations, if the matter is going to be settled (which will eventually happen one way or another), it is very important to have an accurate estimate of the losses. ADCB is UAE Government owned bank as many of the rest, and its interests will be defended and protected by the whole GCC members. It is only a matter of time to find the right solution.

The news about the exposure will have only temporary effect on investors, which is seen recently as big dumping. However, there is also serious accumulation in ADCB.

[RaNdoMwalk]

You are right, Propo. Though ADCB has the largest exposure to the two Saudi groups, it has been finding support at 2.43. Continued accumulation may mean it can again touch 2.70s soon.

[Prop]

ADCB is the most undervalued bank from all government banks, yet in the same heavyweight category as NBAD, UNB and FGB. The difference is only that as commercial bank it has more aggressive foreign investments strategy. If you study the past performances, you can see that is poised to advance. During the last few weeks reached briefly 2.66, but I expect higher up this turnaround.

[ixtira]

Reuters 01 October 2009:

UAE-based Union National Bank (UNB) said on Thursday it had no exposure to Saudis troubled Saad Group but its total exposure to Ahmad Hamad Algosaibi & Bros (AHAB) reached $60.5 million. The exposure to Algosaibi is in the form of a joint loan of $20.8 million and trust receipts amounting to $39.7 million, the company said in a statement on the Abu Dhabi bourse website. The bank said in July it had limited exposure to Algosaibi and had taken adequate provisions.

Exposure is much less than expected and may explain the recent rally

[fayesloan]

ixtira-
to my knowledge, 20 million dollars was a confirmed participation in a syndication or "joint loan" of 700 million dollars.
What is surprising to me is the extra 40 million dollars of exposure to the Saudi group that I was not aware of. It makes me wonder if some of the numbers I am 100% sure of with other banks need to be tripled now.

[fayesloan]

Further to my previous comment to ixtira above, I hesitate to think of what the true figure of ADCB's loans to the Saudi companies is.

Question to prop:
How exactly is UNB a "heavyweight category" Abu Dhabi bank?
No way is it in the same league as ADCB. Yes ADCB was aggressive, which is why they did something local banks don't usually do. They fired their young Emirati CEO. That is actually bottom-making material.

[ixtira]

UNB, ADCB and NBAD are "Heavyweights" by virtue of the Abu Dhabi Investment council who own:-

UNB - 50.1%
ADCB - 64.84%
NBAD - 70.48%

In effect these bank are underwritten by Abu Dhabi's oil reserves and thats what makes them safe (relative to other banks).

[newride]

how would you rate DIB when all the banks are struglling..
do you think DIB is going to have a POSITIVE RIDE ahead in october!

[frogleg]

helps to kill rumors which are more damaging to the market!

[frogleg]

if i am correct ADIB have refused to divulge their exposure. and FGB is still to come out with exact figures.
why this delay?

[RaNdoMwalk]

[fayesloan]

Yes, excuse the laziness. The intention was to recall the change in Chairman September last year.
http://www.business24-7.ae/Articles/2008/9/Pages/09152008_73be6ba528a5476db243ecf90c23957c.aspx
Replacing Knox is also a signal ADCB is serious about turning the ship.
Congratulations to them.

[ixtira]

If you want to know where the fear of hidden exposure is at ... just follow the money.

Below are the 3 monthly share price performances of some major UAE banks.

UNB : 24.5
NBAD : 32.84
First Gulf : 26.1
ADCB : 55.06%
Mashreqbank : -22.69%
Emirates NBD 22.2%
DIB : 28.1%

Can anybody spot the odd one out?

[Foreigner]

[RaNdoMwalk]

Disclosures on ADX website and GN yesterday show the following exposures to the two Saudi groups (in some cases, it is not clear whether they are gross or net of provision already made):

US$million
ADCB 609 (net)
Mashreqbank 400 (net)
NBF 25.4
UNB 20.8
SIB 15.1 (50% provision made)
NBQ 12.5 (net of 60% provision)
NBAD 8.7
FGB still determining magnitude (earlier reported total 65 I think)
ADIB refused to disclose magnitude (similar to ADCB's approach in June)
RAKBANK 0
CBI 0
BOS 0
UAB 0
Investbank 0

[fayesloan]

I know of a minimum of 55 million dollars First Gulf Bank exposure.
Participation in two syndications and a small term loan to TIBC.
What has surprised me is the announcement by NBUAQ of exposure to Saad Co. So even inside information can take you only so far. In general I see that the disclosures so far have been greater than indicated in my own records. That is indicative of how huge and complicated the exposures are. The two Saudi family companies in question are by no means the only ones of their kind in the Gulf so it is scary to think what lies beneath the surface.
Regarding Mashreq share price, it has always been a sluggish stock, but the price action may be telling anyway?

[Prop]

From all what I have read everywhere, I understand that ADIB and FGB have the maximum exposure, the figures of which will not be released at least before Q3 results, if at all.

However, this exposure news is not new, but dating before Q2 results come out. It doesn't deserve the noise and apparently is mildly/temporarily affecting the share price.

Watch out ADCB, because it seem investors have come to terms with the media reports and are accumulating.