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Moody's cuts Tamweel on slow support, funding costs

Ratings agency Moody's downgraded the issuer rating of Dubai mortgage lender Tamweel on Thursday, citing factors including the firm's falling asset quality, a slow state support process, and higher funding costs.

The downgrade to Baa1 from A3 was driven partly by "the deterioration of Tamweel's standalone financial profile in the wake of materially higher funding costs, heightened provision charges and frozen asset growth, with very limited capacity to absorb increasing charges with higher volumes", Moody's said.
Moody's also cited "high dependence on concentrated wholesale bank funding amplifying liquidity risks, and forcing indirect government support .. (and) a very slow merger and support process from the authorities, with delays placing Tamweel in a difficult operating position, which in turn contributes to a weakening of its franchise value".

Tamweel and rival Amlak Finance PJSC are being restructured by the government and could be merged as they suffer from a sharp downturn in real estate prices after Dubai's once booming property sector was hit by a global slowdown.

Officials have been saying since March a decision would be made soon on the merger, which has been under review by a federal government committee since the UAE said in November it would merge the two companies with two state-controlled banks.

Moody's statement on Thursday also cited "an incremental deterioration in asset quality, which is expected to worsen in the next few months, in the wake of an expected increase in job losses and lower values of off-plan properties -- primarily in Dubai".

"Given the current uncertainties as regards the timetable, nature, conditions and implementation of the expected support plan(s), Tamweel's Baa1/Prime-2 ratings remain under review, and the direction attached to Moody's review of these ratings stays uncertain," Anouar Hassoune, a Moody's vice president, said in the statement. (Reuters)

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