Moody''s Investors Service cut the ratings of Dubai Islamic Bank, Mashreqbank and Emirates NBD, saying uncertainty over debt restructuring was exacerbating the emirate''s economic woes. "The rating downgrades reflect the weakening in Dubai''s economy and the repercussions on the banks'' asset quality and earning power," Moody''s said in a statement on Thursday.
"The direct exposures to Dubai World are manageable given high capitalisation levels. However ... the negative investment sentiment that has been sparked by the restructuring could have longer-lasting effects on Dubai''s economy," the statement said. Dubai shocked global markets on November 25 when it said it wanted to delay repayment on billions of dollars worth of debt at its flagship conglomerate, Dubai World.
The Dubai government has said it would not bail out Dubai World, trying to ring-fence profitable firms from its $26 billion restructuring, but its problems have led to credit downgrades for all government-linked firms. Moody''s downgraded Emirates NBD''s deposit ratings to A2 from A1, cutting Mashreqbank''s deposit ratings to Baa1/P-2 from A2/P-1, and downgrading Dubai Islamic Bank''s> issuer ratings to Baa1/P-2 from A1/P-1. "Moody''s also expects that the Dubai World standstill, and the risk of contagion, could erode private sector asset quality, which is already burdened by the property market meltdown in Dubai," it said.
Comments
Comments are closed.