Banks in the UAE say that the number of retail banking customers leaving the country without repaying their debts has dropped significantly in the first half of 2010.
The stabilising economy and measures by the banks to more closely monitor their customers has helped reduce numbers.
UK based HSBC, which has about 300,000 retail customers, says that customer skips are down 50 per cent in the first half of 2010 compared to the same period of 2009. “We had significant delinquencies in 2009, but they have come down in 2010, so it has just been a short-term problem,” says Simon Cooper, chief executive of HSBC Middle East.
“We are definitely seeing the same trend,” adds Fergus McDonald, managing director and country head for the UK’s Barclays UAE business. “Largely though that is because the economy is a lot more stable and we are not seeing the same level of layoffs as we did in 2009.”
Banks across the UAE faced a large number of problem loans to retail customers who lost their job in early 2009 and left the country without settling outstanding debts. It is unclear how much banks lost through retail customers skipping on their debts, but bankers at MEED’s Middle East Retail Banking 2010 all agreed the worst of the problem had now passed.
“There is a clear reduction in the level of skips,” says Richard Musty, managing director of Lloyds TSB in the UAE. He adds that “Delinquencies were lower than I expected and lower than I budgeted for.”
It is not just problems in the expatriate workforce that has presented a problem for the banks. Louis Scotto, head of retail banking at Doha Bank, says problems have also emerged in lending to the local population, who are often allowed to borrow more than expatriates. “If I could collect all the outstanding loans from the locals then we wouldn’t have a non-performing loans problem,” he says.