Gulf Arab banks have more exposure to two struggling Saudi family groups than previously thought, two central bankers said on Monday, the latest setback for lenders recovering from a regional liquidity crunch. Oman's central bank chief raised the spectre of Gulf banks having to take provisions on Saad Group and Ahmad Hamad al-Gosaibi & Brothers Co (AHAB), saying the sultanate's largest lender, Bank Muscat, was probably less exposed than other regional counterparts.
"It (Bank Muscat) could be one of the least exposed banks in the region," Central Bank of Oman Executive President Hamood Sangour al-Zadjali told reporters in Abu Dhabi. "Maybe there are many banks in the Gulf countries and Saudi Arabia in particular that have great exposure."
UAE central bank governor Sultan Nasser al-Suweidi echoed those comments, saying banks in the world's third-largest oil exporter had exposure, which was a cause for concern. "Yes, we are dealing with it and we are concerned about it, and it will be published," Suweidi said when asked about exposure of UAE lenders.
Analysts expect more Gulf Arab banks to eventually reveal exposure to the two family conglomerates, who could represent one of the biggest defaults to hit the Gulf Arab region since the onset of the financial crisis. Saad's woes have rattled a $30 billion empire chaired by billionaire Maan al-Sanea, whose family firm has a stake in HSBC Holdings Plc and owns businesses across the Gulf Arab region ranging from healthcare to contracting.
Both Saad and AHAB have said they are restructuring their debt, without giving the size of their obligations or the companies affected. Bank Muscat said on June 11 its exposure to the two groups totalled 66 million rials ($171.4 million) and it was difficult to say if it may take provisions.
The energy-exporting Gulf Arab states have already been pumping in billions of dollars to prop up local banks suffering from a liquidity squeeze and economic slowdown due to the drop in oil prices from a peak of $147 a barrel in July last year. The UAE central bank earlier this month directed banks to stop lending to the two Saudi firms. It is unlikely that other Gulf Arab family owned businesses will face similar financial problems, Suweidi said. "I don't take this to be a trend," he said.
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