Concerns on Dubai

Bloomberg

Citigroup raised its estimate of the cost of equity for U.A.E. banks to 11.6 percent from 10.5 percent to reflect the "higher risk environment" from a decline in property prices in the country, the bank said yesterday in a research report.

Residential property prices in Dubai have increased fourfold in the past five years helped by surging economic growth that attracted thousands of expatriate workers to the emirate. The bubble may be about to burst as Dubai and Abu Dhabi house prices fell for the first time in October, HSBC Holdings said in a report Nov. 12, after credit markets seized up, banks tightened mortgage criteria and projects were scaled back.

Citigroup said it had cut the fair value estimate of Abu Dhabi Commercial Bank PJSC to 2.9 dirhams from 7 dirhams, of First Gulf Bank PJSC to 16.4 dirhams from 31.5 dirhams and of National Bank of Abu Dhabi PJSC to 15.6 dirhams from 26 dirhams. It still rated the shares a "buy," saying the sharp reduction in the shares already prices in risk.