Thursday, 9 September 2010
Dubai Islamic Bank may raise Tamweel stake
Wednesday, 2 June 2010 at 18:33, Reuters, Dubai
Dubai Islamic Bank (DIB) may increase its one-fifth stake in Tamweel, signalling a long-awaited merger between the United Arab Emirates' two largest mortgage lenders could be scrapped.
A government committee has been reviewing a merger between Tamweel and rival Amlak since 2008, and resolving the matter is seen as key to kick-starting lending in Dubai's battered property market.
"The bank is currently evaluating the possibilities of increasing its stake in Tamweel," Dubai Islamic Bank said in a statement on Wednesday.
Raising its investment in Tamweel could make DIB more active in the mortgage market, said Deepak Tolani, vice president of equity research at Al Mal Capital.
"Tamweel is still an okay company and if DIB can have more control over the company and its management, the may be able to control its future activities a bit more," Tolani said. "It helps them to an unlock an investment they have made."
DIB, Dubai's third-largest bank by market value, did not comment on a report in Arabic-language daily Alrroya Aleqtissadiya that it planned to take over Tamweel and was in talks with the mortgage lender's creditors to restructure debt.
Alrroya Aleqtissadiya, citing sources familiar with the matter, said the long-planned merger had been ended.
"A proposal to merge the two companies has been dropped to be replaced with the option of Dubai Islamic Bank stepping in to save Tamweel," the paper said.
"While other information suggested that a Dubai government-linked company could take a similar step towards Amlak," it added.
Tamweel's chairman declined to comment while Amlak officials could not be reached immediately.
The collapse of Dubai's once-booming property sector hit Tamweel and Amlak hard. Both shares were suspended in 2008 and have not traded on the Dubai Financial Market since.
Merging the two into a single Islamic lender or creating a four-way tie up with two other state-controlled banks were among the proposals under consideration.
UAE Economy Minister Sultan bin Saeed al-Mansouri has headed the government panel's review of the merger since November 2008.
Mansouri said in October the committee had a preliminary agreeement that shareholders, the federal government and the government of Dubai would each own a third of the new Islamic bank, but that the cabinet would make the final decision.
Talks to boost DIB's stake in Tamweel have begun and hinge on creditors' agreeing to reschedule the mortgage lender's debt, according to a letter the newspaper said it had seen.
The report said DIB proposed Tamweel creditors agree to a minimum five-year moratorium on their debt, with a 4 percent annual return.
"Sources said that Dubai Islamic's next step is the full acquisition of the company," the newspaper said.
"If these transactions help facilitate financing then it will be a positive move," said Saud Masud, head of research and senior real estate analyst at UBS in Dubai.
"But I don't see how DIB adding more exposure to Tamweel would help putting financing back in the market. We still have concerns about Dubai and UAE banking in general," he added.
A government committee has been reviewing a merger between Tamweel and rival Amlak since 2008, and resolving the matter is seen as key to kick-starting lending in Dubai's battered property market.
"The bank is currently evaluating the possibilities of increasing its stake in Tamweel," Dubai Islamic Bank said in a statement on Wednesday.
Raising its investment in Tamweel could make DIB more active in the mortgage market, said Deepak Tolani, vice president of equity research at Al Mal Capital.
"Tamweel is still an okay company and if DIB can have more control over the company and its management, the may be able to control its future activities a bit more," Tolani said. "It helps them to an unlock an investment they have made."
DIB, Dubai's third-largest bank by market value, did not comment on a report in Arabic-language daily Alrroya Aleqtissadiya that it planned to take over Tamweel and was in talks with the mortgage lender's creditors to restructure debt.
Alrroya Aleqtissadiya, citing sources familiar with the matter, said the long-planned merger had been ended.
"A proposal to merge the two companies has been dropped to be replaced with the option of Dubai Islamic Bank stepping in to save Tamweel," the paper said.
"While other information suggested that a Dubai government-linked company could take a similar step towards Amlak," it added.
Tamweel's chairman declined to comment while Amlak officials could not be reached immediately.
The collapse of Dubai's once-booming property sector hit Tamweel and Amlak hard. Both shares were suspended in 2008 and have not traded on the Dubai Financial Market since.
Merging the two into a single Islamic lender or creating a four-way tie up with two other state-controlled banks were among the proposals under consideration.
UAE Economy Minister Sultan bin Saeed al-Mansouri has headed the government panel's review of the merger since November 2008.
Mansouri said in October the committee had a preliminary agreeement that shareholders, the federal government and the government of Dubai would each own a third of the new Islamic bank, but that the cabinet would make the final decision.
Talks to boost DIB's stake in Tamweel have begun and hinge on creditors' agreeing to reschedule the mortgage lender's debt, according to a letter the newspaper said it had seen.
The report said DIB proposed Tamweel creditors agree to a minimum five-year moratorium on their debt, with a 4 percent annual return.
"Sources said that Dubai Islamic's next step is the full acquisition of the company," the newspaper said.
"If these transactions help facilitate financing then it will be a positive move," said Saud Masud, head of research and senior real estate analyst at UBS in Dubai.
"But I don't see how DIB adding more exposure to Tamweel would help putting financing back in the market. We still have concerns about Dubai and UAE banking in general," he added.
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