A number of Emirati banks announced their exposure to the debts of the Phoenix company, which has entered the liquidation stage, after a similar crisis faced by banks in the UAE due to the scandal of "NMC" health care company, which is threatened with bankruptcy.
First Abu Dhabi Bank, the largest bank in the Emirates, announced today, Wednesday, its exposure of $ 73.2 million to Phoenix Commodities, agricultural trade and related entities.
This is the largest exposure that an Emirati bank has ever announced to the group that entered the liquidation stage, after accumulating potential trading losses exceeding $ 400 million, according to a document prepared by the officials of the liquidation and seen by Reuters.
The bank said in a disclosure to the Stock Exchange that its exposure includes $ 7.7 million on Phoenix Commodities as part of a joint loan with other banks, as well as $ 55.3 million in the form of bilateral and joint loans to associated entities. First Abu Dhabi Bank will unveil its $ 10.2 million SMGDMCC.
The bank said in its disclosure, "The joint loans were secured through a set of guarantee mechanisms that include bank account undertakings, transfer of revenues in favor of the bank, and institutional guarantees. Bilateral loans of the subsidiaries of the group were also secured by institutional guarantees, some of which are guaranteed by cash margins."
For his part, Emirates NBD - the largest of Dubai banks - announced on Tuesday its exposure of 23.66 million dollars to Phoenix Commodities, which has offices in Dubai and Singapore.
Mashreqbank also announced that it has more than 43 million dirhams ($ 11.7 million) in exposure.
According to the local press, 14 banks and financial companies have announced that they will be exposed to the company, which is based in the Dubai Multi Commodities Center.
Informed sources told Reuters that Standard Chartered is one of the banks that provided financing for the Phoenix group. The bank has declined to comment on the extent of its exposure.
Standard Chartered was one of the banks that helped Phoenix raise a $ 205 million loan in late 2017, and Abu Dhabi Bank was the first of the banks to participate in the deal.
Information reported by Reuters revealed that Phoenix has facilities of more than one billion dollars from Emirati and other banks.
This crisis comes to increase the pressure on the banking sector, which is still under the influence of the scandal of the collapse of the "NMC" healthcare company.
The UAE banking sector has lived - and still is - a real confusion, as several local banks exposed the troubled Emirati Hospital Management Company, "NMC Health" and its subsidiaries.
This concern is due to the fact that these banks give huge loans to the company that is close to declaring bankruptcy.
The total proceeds of loans granted by these banks collectively to the troubled company amount to about three billion dollars, of which the UAE banks share more than two billion.
Experts believe that such crises will increase pressure on UAE banks, in light of tight liquidity due to the closures in economic activities, against the backdrop of the spread of the Corona virus.
Financial analyst Nidal Khouly told Al Jazeera Net yesterday that the banks in the UAE will face problems because of their exposure to the debts of the health companies "Phoenix Commodities BVT" and "NMC".
He added that the banks fall into great trouble when the customer is classified as "unquestionable," and suddenly he turns into a customer under liquidation, as is the case for the two companies.
In this case, according to Khouly, the profits of the banks are diminished, and its capital faces a number of risks related to the customer's inability to pay.