* Most Gulf banks’ income damage by impairment fees * Reimbursement deferral schemes masks scale of dangerous loans * Extra stress on banks’ provisioning seen in H2 – analysts By Davide Barbuscia DUBAI, July 28 (Reuters) – Most Gulf banks’ income plunged within the second quarter after a spike in impairment fees for anticipated credit score losses, as regional economies reel from the double blow of low oil costs and the coronavirus outbreak. However the banks may have to put aside much more cash within the second half of the 12 months to cowl dangerous loans, as their full impression on banks has up to now been curbed by stimulus measures permitting debt compensation delays, analysts say. “Given that we have payment holidays, the current asset quality metrics as measured by the non-performing loans, still does not fully reflect the true size of these non-performing loans,” mentioned Ashraf Madani, a senior analyst at Moody’s. “Hence we expect further pressure on provisioning charge once those NPLs (non-performing loans) get reflected in the financial position of banks and as they move to stage 3.” Stage 3 loans are NPLs that require vital writedowns. Saudi Arabia’s largest lender, Nationwide Business Bank , noticed its quarterly revenue drop by 22.3% 12 months on 12 months to 2.1 billion riyals ($559.97 million) as a consequence of a decline in working earnings and better working bills. “Total operating expenses including impairments were higher by 18.4% mainly due to higher net impairment charge for expected credit losses,” the bank mentioned in a bourse submitting this week. Emirates NBD, Dubai’s largest bank, final week introduced a 58% fall in second-quarter revenue. It put aside over $1.1 billion up to now this 12 months to cowl dangerous loans. First Abu Dhabi Bank, the UAE’ largest lender, reported a 25% fall in revenue on Tuesday, dragged down by one other quarter of upper impairment fees. DELINQUENCIES Malik Zahir, chief funding officer for fairness asset administration at Bahrain-based SICO, mentioned that in comparison with the primary quarter, the rise in provisions amongst Gulf banks was not vital however that they are going to seemingly rise within the second half of the 12 months. “Almost all regulators have instructed the banks to defer loan instalments of clients exposed to the lockdown by circa six months, this has limited the growth in delinquency.” “In the case of the UAE, companies’ layoffs have just started to gather pace, so we would see the delinquencies emanating from this probably in the third quarter,” he mentioned. In Qatar, income dropped sharply within the second quarter for Qatar Nationwide Bank, the Gulf’s largest lender, which elevated loan loss provisions to 1.5 billion riyals from 605.5 million a 12 months earlier. Qatari banks’ income and asset high quality are prone to weaken this 12 months, Fitch Scores mentioned this week, however the true impression might be masked within the brief time period by loan deferral schemes and regulatory flexibility for banks to recognise impairments beneath IFRS9 – an accounting rule launched after the worldwide monetary disaster. Dubai-based Arqaam Capital mentioned on Tuesday that it anticipated whole dividends per share and dividend pay-out ratios “to be cut substantially or fully cancelled” this 12 months for many Gulf lenders. (Modifying by Emelia Sithole-Matarise)Our Requirements:The Thomson Reuters Belief Rules.