SPECIAL REPORT COVID-19: THE IMPACT
Foreseeable pain points for banks Bhavin Shah, Partner at Roland Berger’s Dubai office, tells Banker Middle East of his projections and the importance of taking a proactive stance in trying times
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Bhavin Shah
“POSSIBLE RATES CUTS AND INCREASED PROVISIONING ON BAD LOANS (DUE TO A DECREASING ASSET QUALITY) ARE LIKELY TO EAT INTO THE PROFITS OF BANKS IN THE REGION.” — Bhavin Shah
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BANKER MIDDLE EAST | APRIL 2020 | ISSUE 229
ith everything that is currently going on, what is your outlook on this market for 2020?
Given the grave situation regarding the COVID-19 virus, I believe that it is only fair that we discuss the potential impact of this health crisis on the economy and government measures directed at it. The crisis, declared by the WHO as a pandemic, has already caused the slowing down of several global economies. The US stock market has been sent into a bear state. Trade across the globe is expected to be hit hard; the Middle East is no exception. For the region, the outbreak of the virus could lead to reduced borrowing and lending. In response to this, governments and central banks all over the world have enacted fiscal and monetary stimulus measures to counteract the disruption. The Central Bank of the UAE has announced a comprehensive AED100 billion stimulus package to help retail customers and corporates overcome financial constraints. The Targeted Economic Support Scheme consists of AED50 billion from the Central Bank funds through collateralised loans at zero cost to all banks operating in the UAE and of AED50 billion funds freed up from banks' capital buffers. These measures are aimed at helping retail and corporate customers in tough times and will enter into force with immediate effect. Plethora of other initiatives are being taken by the Central Bank to ease the burden on consumers. While we may discuss the outlook for banking and financial services, we must always remember that the severity of the impact of this pandemic will determine the validity of these outlooks and opinions.
What are your views on the banking and finance sector in this region? The evolution of financial services in the region has arguably been slow and painful over the last decade. Changing customer preferences, aggressive rivals cornering market shares and the regulatory environment have necessitated
