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Lloyds Expects Dubai World Agreement to Boost Liquidity

UAE : 16 September 2010

UK-based Lloyds Banking Group forecasts a boost in liquidity for the UAE following the Dubai World deal, but a senior exec notes bank lending will stay as it is

Managing Director of Lloyds Middle East Richard Musty stated that an agreement on Dubai World would be a demonstration of the region’s ability to handle financial troubles.

Musty also said that such a resolution would increase liquidity throughout the area by empowering some of the companies involved, like Nakheel, and allowing them to bring certain projects to completion and have a positive effect on the region.

The UAE’s sharp property decline left banking firms hard hit and forced them to take action on bad loans.  Lenders from around the world, including Lloyds, practiced tighter lending in response.

Musty noted that loans are fairly static at the moment, although deposits are on the rise.

Lloyds has a place on the unofficial coordination committee that worked through the deal between creditors and the Dubai World group.  Most of the creditors, 99 per cent of them, are in agreement with a restructuring plan that involves debts totaling $25 billion.

The main Dubai branch for Lloyds is in Jumeirah and netted a profit in the Middle East of 96.1 million dirhams ($26.2 million) for 2009.  Jumeirah is an affluent neighborhood on the beach that is the home of many well to do Emiratis and expat families.

UK banking institutions, including Lloyds, are heavily exposed to the debt troubles in the UAE.  Traditionally linked to the region, the UK banks were a part of the bad debt spike.

Musty noted that there are harmful areas in the still sensitive banking sectors.  He expects that the situation in the industry will remain static throughout 2010 and likely start experiencing relief next year.

Musty noted that Lloyds has new expansion initiatives in the works but he would not be specific.

He said although Lloyds does not have Islamic banking services at the moment, should the demand present itself through their clients, the bank would take that into consideration.

Lloyds currently has shariah compliant banking service in the United Kingdom.

Musty noted that although the short term expectations are challenging, in global terms the UAE is anchored with oil and gas reserves, making the mid to long term outlook a positive one.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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