Standard & Poors Puts Four Dubai Banks on Credit Watch

Dubai banks Emirates Bank International PJSC, National Bank of Dubai, Mashreqbank PSC and the Dubai Islamic Bank PJSC have all been put on credit watch by Standard & Poor's rating agency after the city state's largest corporate entity, Dubai World, asked creditors for a six-month standstill on debt repayments.

The agency has placed its CreditWatch on the the 'A-' long-term rating for the four banks while affirming its 'A-2' short-term ratings on Emirates Bank International, National Bank of Dubai and Mashreqbank.

"The rating actions reflect the large exposure these banks have to Dubai World and Nakheel, and more generally to Dubai-based government related entities, and the risks that the standstill agreement would pose to these banks," said S&P credit analyst Mohamed Damak.

"This comes at a time when the deteriorated economic environment, including the fall of real-estate prices, has already started to weigh on the financial profile of these banks," he added.

Asset quality indicators are also expected to worsen as some of these banks have exposure to Ahmad Hamad Al Gossaibi Brothers and Saad Group, which defaulted on their obligations earlier in 2009.