UAE: Dubai Financial Services

The emirate’s banking sector is still working to shake off the lingering effects of the global financial crisis, with lenders having to make higher provisions for debts than some of their neighbours who were less encumbered when the global economy went into decline.

Interest in Dubai’s bond market is undergoing a revival, with enthusiasm tracking the steady rebound of the emirate’s economy. There are still some lingering concerns, however, over whether all bonds can be repaid on time or if another round of rescheduling will be required.

The banking industry looks set for a period of consolidation and belt tightening, with many of Dubai’s analysts predicting an easing of profits and an increase in non-performing loans (NPLs) for the near term. Though mergers and restructuring by some local lenders is expected to produce a leaner sector, it should also become stronger and thus better able to meet the demands of the rapidly changing financial landscape.

Dubai’s capital markets are much better placed to handle the recent economic fall-out in the US and the eurozone, having learned several lessons from the 2008 global crisis and its own downturn two years ago.

A proposal to merge the operations of the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) appears to be gaining momentum, with stock market officials discussing a plan that could result in the creation of a powerful regional bourse better positioned to compete with nearby rivals and larger international operators.