The United Arab Emirates expects the meltdown in U.S. mortgages to have little impact on profits of its banks because of their limited exposure to subprime home loans, the central bank said.
Banks in the UAE have been returning to profit growth this year after a stock market crash in 2006 hit earnings. Four of the six largest lenders either beat third-quarter profits forecasts or came in at the top of end of the range.
The central bank was satisfied that the exposure of UAE banks to mortgages extended to Americans with poor credit "will not affect the overall good results of banks in 2007", the central bank said, after a meeting of its board of directors. The exposure to high-risk U.S. home loans, was marginal and limited to a few banks, the central bank said in a statement on Saturday, without giving details.
Subprime mortgage defaults triggered a global credit crunch in July, forcing banks from Asia to the United States to wipe billions of dollars off loan books. Citigroup, the largest U.S. bank, said its direct sub-prime was exposure of $55 billion.
Most UAE banks have reported no losses from the credit market crunch.
Abu Dhabi Commercial Bank, the second largest lender in Abu Dhabi emirate, said losses on its investment portfolio from a global credit crunch reduced third-quarter profit by 70 million dirhams ($19.06 million). (Reuters)