Dubai Islamic Bank shares suspension lifted

SHARES SUSPENDED: Dubai Islamic Bank is reportedly in takeover talks. (Getty Images)

Dubai Islamic Bank shocked investors by repossessing a "substantial area" of land in a multi-billion-dollar luxury theme park on Thursday, sending shares down sharply.

DIB shares fell over four percent at one point to their lowest level since mid-2007 as investors struggled to calculate how much the high-profile foreclosure will cost DIB, which is already embroiled in a real estate corruption probe.

"We need to know what is going on to see how it will impact the bank's finances and eventualy impact our valuation," said one equity analyst.

A spokesman at DIB, the Gulf Arab trade hub's biggest Islamic bank by market value, declined to comment about the polo-themed development called the Plantation Project, whose British owner is involved in a wider probe.

Worries about an overheated property market in Dubai, home to three palm-shaped islands and the world's tallest building, have sent real estate and financial stocks reeling in recent weeks with most indices erasing all 2008 gains.

The government's anti-corruption campaign in Dubai, which started this year and has also touched DIB, has resulted in a number of arrests. But worries persist that the property boom has resulted in widespread kickbacks, corruption, or waste.

At its 2004 launch, the Plantation Project promised to create one of the world's largest equestrian facilities with air conditioned stables for 800 horses.

Raj Madha, director of equity research at bank EFG-Hermes, said the foreclosure came as a surprise but that DIB would likely be able to limit the damage.

"The worst case scenario seems to be a $200 million loan, which is equivalent to four percent of market cap and we believe that security is probably strong enough to cover the bulk of that," he said.

DIB attempted to assure investors that it had adequate security to cover its exposure to the project.

"At all times, DIB had strong control of the security had strong control of the security as well as other securities covering the same transaction, and waited on foreclosure as per the legal requirements of the foreclosure process," DIB said in a statement.

The plot is in Dubailand, a stretch of desert almost five times the size of Manhattan, where Dubai Holding is building an $80 billion project it claims will be the world's longest leisure strip with hotels modelled on Egyptian palaces, Hollywood and London's Houses of Parliament.

Dubai Holding is owned by Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai.

Earlier this year, former employees of DIB, came under investigation by Dubai police as part of a government crackdown on alleged corruption, but none of the cases have led to convictions.

Islamic banks cater to investors who want to avoid earning or paying interest, viewed as usury in Islamic law.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM