Survival of the fittest: UAE corporates can cope with stress

Total assets of 53 listed non-financial corporates decreased slightly to $127 billion in the third quarter 2011 from $128 billion in the same period a year earlier

The Washington-based fund said in its country report on the UAE, the non-financial corporate sector in the UAE is showing signs of fiscal improvement, albeit stress testing indicates continued vulnerabilities to global financial conditions.

Total assets of 53 listed non-financial corporates decreased slightly to $127 billion in the third quarter 2011 from $128 billion in the same period a year earlier in spite of the worldwide financial meltdown.

However, 10 of those corporates, mostly real estate companies, which have either operating losses or do not have ample operating income, “have sufficient cash cushions to service their debt,” the fund noted. In its report, the IMF had noted that stress tests show that the banking system could address moderate external liquidity shocks with its own resources.

The IMF report said the total assets of the non-financial corporate sector make up about 37 per cent of the country’s gross domestic product, or GDP, and 34 per cent of bank assets. “Total debt has remained constant at around $34 billion while corporate leverage is within reasonable limits, with a debt–equity ratio of two. Short-term debt constitutes nine per cent of total debt,” the IMF report said.