UAE banks may take DWorld provisions from Q3-bankers

* Banks await cenbank guidelines on Dubai World exposure

* Dubai World debt deal to be presented to all banks shortly

* General provisions edge up in May - cenbank data

By Stanley Carvalho

ABU DHABI, June 27 (Reuters) - Banks in the United Arab Emirates are likely to book specific provisions against loans to Dubai World [DBWLD.UL] in the third quarter as they await guidelines from the central bank, bankers and analysts said on Sunday.

The central bank has directed banks to book only general provisions in the second quarter until its recommendations are ready, a senior Abu Dhabi banker said.

"We were told the committees in the central bank are still working on the subject of provisions," said the banker, who asked not to be named.

Last week the central bank held a meeting with the chief executives of local banks and discussed matters relating to liquidity and real estate but did not discuss anything relating to Dubai World provisions.

The central bank did not return calls seeking comment.

"The stock market has already priced in the provisioning needs of the local banks, so the timing of when banks book provisions is not the main issue. The third quarter is likely, sounds plausible," said a senior executive at a Dubai-based bank.

"This could be an individual institutional call. It's a material event for 2010, something that needs to be addressed before the end of the year."

In May Dubai World reached a deal in principle to restructure $23.5 billion in debt with core lenders holding 60 percent of the exposure, in a deal to repay creditors over five and eight-year maturities.

The final terms of the debt deal are expected to be presented to remaining creditor banks towards the end of June or in July. [ID:nLDE65M19H]

"Until there's further clarity from the Central Bank, we will take general provisions in Q2 as we did in Q1 for our exposures," another banker said.

Banks in the UAE have an estimated exposure of $15 billion to Dubai World. Dubai lender Emirates NBD ENBD.DU and Abu Dhabi Commercial Bank ADCB.AD are thought to carry a large proportion of the exposure.

Provisions of UAE banks for non-performing loans (NPLs) declined to 35.2 billion dirhams in May from 36 billion dirhams while general provisions edged up to 13.6 billion dirhams in May from 13.4 billion dirhams the previous month, according to Central Bank data.

"Banks are looking for guidance from Central Bank and they may now take provisions in third quarter," said Deepak Tolani, analyst at Al Mal Capital.

UAE banks will also need to comply with International Financial Reporting Standards (IFRS) which could lead to quite specific requirement from the central bank on Dubai World provisioning.

Ratings agency Moody's in a recent note said the outlook for UAE banks remained negative on continued asset quality concerns.

"Dubai World's recent restructuring is central to defining problem loans that pose significant asset quality challenges to the UAE banking system," the note said.

"Problem loans could more than double by year end 2010 to around 9.5 percent to 12.5 percent of gross loans, taking into account the Dubai World restructuring", said John Tofarides, Moody's analyst, in the note. (Additional reporting by Rachna Uppal; Editing by Dinesh Nair and Greg Mahlich)