19 March 2009

* Four Dubai-based banks long-term ratings placed on CreditWatch negative on deteriorating operating environment

UAE. Standard & Poor's Ratings Services said today that it has placed its long-term counterparty credit ratings on four Dubai-based banks, namely Emirates Bank International (EBI), National Bank of Dubai (NBD), Mashreqbank, and Dubai Islamic Bank (DIB) on CreditWatch with negative implications.

The 'A-1' short-term ratings on EBI, NBD, and Mashreqbank were also put on CreditWatch with negative implications, while the 'A-2' short-term rating on DIB was affirmed. S&P said this action reflects its growing concerns regarding the impact on the banking sector of the economic downturn in Dubai.

A statement said: "The outlook for Dubai's economy, in our view, has worsened relative to last year; the global economic downturn has been hurting some of Dubai's key economic sectors including trade, tourism, and commerce. Demand in the all-important real estate sector also continues to show clear signs of stress, with indications that a sharp correction is underway.

"As a result, we expect Dubai's economy to contract between 2% and 4% in real terms in 2009, putting pressure on banks' asset quality and profitability. Dubai is a small open economy that can do little to shield its key sectors from the impact of a fall in external demand in the coming months.

"The rating actions on EBI, NBD, and DIB also reflect our concerns that the government may use these banks to support the refinancing that is soon coming due of the debt of other government-related entities (GREs). We already noticed that these banks have been important participants to the refinancing of Borse Dubai's debt that matured in February 2009.

"We understand that these banks received deposits to neutralise the impact on their liquidity profile. Taking into account the important amount of Dubai GRE debt that is soon coming due, Standard & Poor's believes that additional directed lending to these entities would increase credit and concentration risk. On a positive note, Dubai's establishment of a US$20 billion bond program at the government level and issuance of US$10 billion that was fully subscribed by the Central Bank of the UAE somewhat alleviate liquidity pressure.

S&P also said it is concerned about Dubai-based banks' exposure to the real estate sector - about 20% of total loans at year-end 2008 - in light of the marked deterioration of this sector. Standard & Poor's expects the correction to result in a decline in asset quality and profitability indicators for the four banks in the coming quarters.

Standard & Poor's classifies the UAE as "interventionist" toward its banking sector, meaning that it expects the government to provide extraordinary support to systemically important banks in case of need.

Therefore, the long-term rating on Mashreqbank is one-notch above its stand-alone credit profile owing to its systemic importance. The long-term ratings on EBI, NBD, and DIB are two notches above their stand-alone credit profile owing to their systemic importance and significant ownership by the Dubai government.

To resolve the CreditWatch placement, Standard & Poor's said it will assess the expected impact of the deteriorating economic conditions and real estate sector on the financial profile of these banks. It will also update our assessment of the government of Dubai's willingness and capacity to provide extraordinary support to these banks in case of need, in light of the changing environment and its related impact on its creditworthiness.

After consideration of these elements, S&P said it expects to resolve the CreditWatch status in the coming six weeks. It does not anticipate to lower the ratings on these banks by more than one notch, based on the current expectations.


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Lebanon Time-Line

Introducing Lebanon

Coolly combining the ancient with the ultramodern, Lebanon is one of the most captivating countries in the Middle East. From the Phoenician findings of Tyre (Sour) and Roman Baalbek's tremendous temple to Beirut's BO18 and Bernard Khoury's modern movement, the span of Lebanon's history leaves many visitors spinning. Tripoli (Trablous) is considered to have the best souk in the country and is famous for its Mamluk architecture. It's well equipped with a taste of modernity as well; Jounieh, formerly a sleepy fishing village, is a town alive with nightclubs and glitz on summer weekends.

With all of the Middle East's best bits - warm and welcoming people, mind-blowing history and considerable culture, Lebanon is also the antithesis of many people's imaginings of the Middle East: mostly mountainous with skiing to boot, it's also laid-back, liberal and fun. While Beirut is fast becoming the region's party place, Lebanon is working hard to recapture its crown as the 'Paris of the Orient'.

The rejuvenation of the Beirut Central District is one of the largest, most ambitious urban redevelopment projects ever undertaken. Travellers will find the excitement surrounding this and other developments and designs palpable - and very infectious.

Finally, Lebanon's cuisine is considered the richest of the region. From hummus to hommard (lobster), you'll dine like a king. With legendary sights, hospitality, food and nightlife, what more could a traveller want?

Introducing Beirut

What Beirut is depends entirely on where you are. If you’re gazing at the beautifully reconstructed colonial relics and mosques of central Beirut’s Downtown, the city is a triumph of rejuvenation over disaster.

If you’re in the young, vibrant neighbourhoods of Gemmayzeh or Achrafiye, Beirut is about living for the moment: partying, eating and drinking as if there’s no tomorrow. If you’re standing in the shadow of buildings still peppered with bullet holes, or walking the Green Line with an elderly resident, it’s a city of bitter memories and a dark past. If you’re with Beirut’s Armenians, Beirut is about salvation; if you’re with its handful of Jews, it’s about hiding your true identity. Here you’ll find the freest gay scene in the Arab Middle East, yet homosexuality is still illegal. If you’re in one of Beirut’s southern refugee camps, Beirut is about sorrow and displacement; other southern districts are considered a base for paramilitary operations and south Beirut is home to infamous Hezbollah secretary general, Hassan Nasrallah. For some, it’s a city of fear; for others, freedom.

Throw in maniacal drivers, air pollution from old, smoking Mercedes taxis, world-class universities, bars to rival Soho and coffee thicker than mud, political demonstrations, and swimming pools awash with more silicone than Miami. Add people so friendly you’ll swear it can’t be true, a political situation existing on a knife-edge, internationally renowned museums and gallery openings that continue in the face of explosions, assassinations and power cuts, and you’ll find that you’ve never experienced a capital city quite so alive and kicking – despite its frequent volatility.