Dubai Islamic Bank downgraded by Merrill

EMBEZZLEMENT CASE: Dubai Islamic Bank has been hit by the police investigation into its property affiliate Deyaar, with London-based analysts downgrading the bank’s rating.(Getty Images)

Dubai Islamic Bank has been hit by the police investigation into its property affiliate Deyaar, with London-based analysts downgrading the bank’s rating.

Dubai Islamic Bank owns 41% of Dubai property developer Deyaar, which is currently under investigation for alleged financial irregularities within the firm. Merrill Lynch on Tuesday cut their ‘buy’ rating on the bank to ‘neutral’, newswire Bloomberg reported.

“We are downgrading DIB due to our concerns about an embezzlement case at its real-estate associate Deyaar which it owns 41% of,'' Merrill Lynch said in a statement to clients.

Dubai Public Prosecution, which is probing Deyaar's former Chief Executive Officer Zack Shahin for fraud, is likely to take the case to court, Deyaar's Chairman Nasser Bin Hassan Al-Shaikh said on Sunday.

Earlier this month Al-Shaikh attempted to reassure investors by saying the incidents in question had occurred in the past and had already been reflected in the company’s historical financial disclosures.

According to unconfirmed media reports, the Public Prosecution is investigating company fraud valued at 120 million dirhams ($33 million).

Deyaar rents and manages properties and operates according to Islamic law, or sharia, which bans borrowing or lending on interest.

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