DUBAI, Might 21 (Reuters) – United Arab Emirates banks are in danger from a spike in dangerous loans over the subsequent one to 2 years because the oil-producing financial system is hit by a “triple whammy” of a stoop in oil costs, decrease financial exercise and low rates of interest, S&P mentioned . Already, UAE’s greatest lenders, together with First Abu Dhabi Bank <FAB.AD, and Emirates NBD have reported a spike in loan impairment costs for the primary quarter. “We expect the triple whammy of a sharp drop in oil prices, lower economic activity due to COVID-19, and lower interest rates will lead to a rise in problem loans and the cost of risk, as well as lower profitability for banks in the UAE,” S&P rankings company mentioned on Wednesday. It mentioned the quantity of stage 3 loans – non-performing loans that require important writedowns – will rise to 7%-8% of system-wide loans in 2020-2021, and problematic property will rise to about 20% of complete loans. Stage 3 loans comprised 4.4% on common of the overall on the United Arab Emirates’ (UAE) 10 largest banks at end-2019, S&P mentioned in a report. It additionally mentioned the actual property sector, which had already been weakened by elevated provide, faces dangers from the halt in exercise attributable to a deep fall in oil costs, which in April dropped to greater than 20-year lows, and the coronavirus outbreak, which causes the COVID-19 respiratory illness. The financial system of Dubai, the monetary hub of the UAE and of the Gulf, was hit exhausting in 2009, when the worldwide credit score disaster brought about its actual property market to crash and a few of its state-linked firms have been pushed to the brink of a debt default. The banking system’s complete publicity to the actual property and development sectors was 26.4%, S&P mentioned. (Reporting by Saeed Azhar; enhancing by Barbara Lewis)Our Requirements:The Thomson Reuters Belief Rules.