Abu Dhabi banks have big Dubai exposure - bank execs

By Stanley Carvalho

ABU DHABI (Reuters) - Years of chasing business in Dubai's property boom means Abu Dhabi banks have built up an exposure to Dubai-based companies worth at least 30 percent of their loan books, senior bankers in Abu Dhabi said on Friday.

As a result, banks face heavy provisioning and the risk that interbank lending costs would leap or that some banks would stop lending to others they see at risk.

"Dubai grew very fast. There were no controls and now banks that cashed in on the boom have to pay a heavy price," said an executive at a major Abu Dhabi-based bank, who spoke on condition of anonymity.

"Most of the credit flow was inevitably to the big, government-backed entities in Dubai in recent years because Abu Dhabi's growth story is relatively very recent," the executive said.

In particular, Abu Dhabi Commercial Bank has at least 8 billion-9 billion dirhams ($2.18 billion-$2.45 billion) exposure to Dubai World and related entities, which will require the bank to book more provisions, a senior executive of the bank said.

"During those years, the property market was still in its infancy in Abu Dhabi, so like other banks here, we, too, diverted our credit to Dubai," the ADCB executive said.

"We have to face the stress that will be caused to our balance sheet and profit and loss account due to this exposure to Dubai World and associated companies because it is a default," the executive, who declined to be named, told Reuters by telephone. "Yes, we will have to take more provisions."

Sheikh Ahmed bin Saeed al-Maktoum, head of a top Dubai financial body, said in a statement late on Thursday that more information about the Dubai World restructuring would be issued early next week. He said he understood concerns in markets and among creditors, but added that "decisive action" was needed.