The trend in economic and industry risk in the UAE is stable, said S&P Global Ratings in a new report, adding that  the residential real estate sector is expected to remain under pressure for at least another year because of continuous oversupply.

Meanwhile, demand-driven weaknesses will hamper the tourism, hospitality, and aviation sectors, as well as some trading sectors, it added in its latest Banking Industry Country Risk Assessment: United Arab Emirates on RatingsDirect.

S&P Global Ratings classifies the banking sector of the UAE in group '5' under its Banking Industry Country Risk Assessment (BICRA). Other countries in group '5' are Bermuda, Hungary, Iceland, Italy, Malta, Mexico, Panama, Peru, Philippines, and Qatar.

Trend in industry risk

The CBUAE's support package is timely and provides some relief to borrowers. UAE banking authorities' reporting requirements have reinforced oversight and transparency, and we expect banks to continue displaying transparency in the recognition and disclosure of problematic assets. We do not expect any major changes in system-wide dynamics or the competitive landscape in 2021.

The banking in the UAE displays the following particular strengths:

•    High-income levels and strong fiscal and external position.
•    Relatively more diversified economy than that of Gulf Cooperation Council (GCC) peers.
•    Funding profile dominated by stable core deposits.

The banking system in the UAE also displays the following particular weaknesses:

•    Weakening of asset quality and significant exposure to risky sectors.
•    Still fragmented banking sector with high price competition.
•    High sector and single-name concentrations. – TradeArabia News Service