Reuters/Dubai
Emirates NBD, the largest bank in the UAE by assets, will take over struggling government-controlled Islamic lender Dubai Bank under orders from Dubai’s ruler. Dubai’s government, which also holds a 55.6% stake in Emirates NBD, has been working to support state-linked institutions saddled with bad debts since the burst of the global asset bubble hit the Gulf emirate two years ago. Emirates NBD executives told a conference call that the takeover was fully supported by Dubai’s government, paid at “fair value” and would not affect profits. “Dubai Bank will be capitalised by ENBD to the extent considered necessary,” chief executive Rick Pudner told reporters, but did not offer specific financial details. “This will have negligible impact on the group’s overall capital ratio.” Dubai Bank had been under scrutiny well before Europe’s latest wave of sovereign and banking debt troubles flared up again this year. “There will be some concern about Dubai Bank’s liabilities, but we hope these have been handled by the Dubai government already,” said Mohamed Ali Yasin, chief investment officer at CAPM Investment in Abu Dhabi. “I think longer term it is better for the reputation of the banking sector in Dubai and UAE,” Yasin said. Dubai Bank and Emirates NBD, as well as other key financial and real estate institutions, are controlled through direct or indirect stakes held by Dubai’s government. Dubai Bank was owned by the private holding company of the ruler of Dubai and taken over by the government in May. When the emirate took control of Dubai Bank it injected an unspecified amount of capital and said its takeover would protect depositors’ interests. Customers deposits stood at 14.9bn UAE dirhams ($4bn) at the end of 2009. The bank may need up to 2bn dirhams in fresh capital to have a “clean balance sheet”, Barclays Capital said. Dubai Bank has not reported figures since 2009, when it had total assets of 17.4bn dirhams against total liabilities of 15.7bn dirhams. It made a 2009 loss of 290.6mn dirhams. ENBD has its own Islamic operations through its affiliate Emirates Islamic Bank (EIB). Analysts have long been calling for fewer banks in UAE, where 23 local and 28 foreign lenders compete for the business of just 5mn people. But strict ownership restrictions, stark valuation disparities and an unwillingness to lose control have stymied tie-ups other than those forced by the state. “This comes in line with Dubai government efforts to enhance the banking sector in the emirate,” the government’s media office said in a statement. Dubai already has stakes in six commercial banks in the UAE, including Emirates NBD. Emirates NBD itself was created in 2007 by the merger of two local banks ordered by Dubai’s ruler and had total assets of 300.3bn dirhams and total liabilities of 266.3bn dirhams as of March 31, according to Reuters data. Dubai Bank was previously wholly owned by Dubai Banking Group, which itself is 70%-owned by Dubai Holding, the investment group owned by Dubai’s ruler, Sheikh Mohamed bin Rashid al-Maktoum. The remaining 30% of Dubai Bank was owned by developer Emaar Properties , which took a writedown of 172mn dirhams on the investment in May. Dubai’s ruler named his uncle and close adviser Sheikh Ahmed bin Saeed al-Maktoum as chairman of Emirates NBD in June. A week ago he said local banks in Dubai had enough liquidity to weather a global downturn.
‘Takeover won’t impact profits, NPLs’Emirates NBD’s top executive said yesterday the takeover of local rival Dubai Bank ordered by Dubai’s ruler will have a negligible impact on the lender’s finances and boost its assets to nearly $80bn. “This transaction will not affect the financial results, nor the profit and loss, and NPL (non-performing loan) percentage due to the structure and the support provided by Dubai,” Emirates NBD’s chief executive officer Rick Pudner told reporters during a conference call. Officials at the bank declined to disclose a takeover price. The new, combined banking entity will hold assets of around 280bn UAE dirhams ($76.3bn), ENBD’s chief financial officer, Surya Subramanian said. ENBD currently has a total balance sheet in the range of 260bn dirhams to 270bn dirhams. Subramanian added that the takeover won’t be included in ENBD’s third-quarter financials and that more details on the transaction may be disclosed before the end of the fourth quarter. Dubai Bank, an Islamic lender which was hit hard by the regional real-estate slump, will continue to operate under its own brand and as a separate entity within the Emirates NBD group, Pudner said. He added that Dubai Bank’s management would stay in place.