Fitch has said it will continue to give five Dubai-based banks a negative outlook while it assesses the impact of the debt restructuring at Dubai World.
The five banks are Emirates NBD, Commercial Bank of Dubai, Mashreqbank, Dubai Bank, and the local subsidiary of the UK’s HSBC – HSBC Middle East.
Fitch says “confidence in Dubai and also the UAE has been adversely affected by the problems at Dubai World since its request to postpone debt repayments on 25 November 2009.” The agency adds that the restructuring of debts on Dubai World “could have a further significant negative impact on the banks’ profitability and capitalisation – if Dubai World’s problems spread into the wider Dubai economy – in terms of rising retail impairments, other corporate failures and higher bank funding costs.”
The current ratings of Emirate NBD, Commercial Bank of Dubai and Mashreqbank are all C, while HSBC Middle East is rated B/C and Dubai Bank is rated C/D.
The agency expects to conclude the ratings review in up to three months time. The ratings of the five banks were first placed on negative outlook on 3 December.