Exposure to the region’s overheated real estate sector is a growing concern for banks in Abu Dhabi, where funding conditions for financial firms are set to worsen, HSBC said yesterday.
HSBC cut its price targets on a number of major banks in the emirate, saying the financial sector would remain challenged by the country’s lack of economic diversification.”The rising concentration of real estate and construction loans in banks’ portfolios is a concern, though we do not see any imminent threats as yet,” HSBC said in a note, claiming First Gulf Bank and National Bank of Abu Dhabi (NBAD) were most at risk from any property market downturn.
HSBC cut its investor recommendation on First Gulf to neutral from overweight with a price target of dhs24.50 and lowered its target for NBAD to dhs19.90 from dhs22.50.Banks in the Gulf have weakened dramatically in recent weeks, weighing on the region’s bourses on concerns that rapid expansion in the real estate market, to which the banks are exposed, may have gone too far.But a spokesperson for NBAD told 7DAYS the bank had no intention of adjusting the significance of real estate in its portfolio.
“Our exposure to the real estate sector in Abu Dhabi is within the limits set by the central bank. We still believe that the demand for property in the UAE is real and sustainable,” the spokesperson said, while accepting there could be a correction in property values.
HSBC also lowered its price target on Union National Bank to dhs11 from dhs11.90, and its target on Abu Dhabi Commercial Bank to dhs6.40 from dhs7.80.
