UAE's First Gulf Bank repays $1.2bn gov't support

Abu Dhabi lender has fully repaid federal funds it received as support in the wake of the global financial crisis

Abu Dhabi-based First Gulf Bank has fully repaid federal government funds it received as support in the wake of the global financial crisis, it said on Monday, a move other banks in the country are expected to follow in 2013.

The United Arab Emirates' Ministry of Finance placed AED70bn (US$19.1bn) with banks to shore up balance sheets after the collapse of Lehman Brothers in September 2008 triggered a seizure of the world's financial system.

However, banks were expected to prioritise repaying this support, converted into seven-year capital-boosting bonds in late 2009, this year as the value of the capital instruments was diminishing and banks could raise cheaper finance in the market.

FGB, the second-largest lender in the UAE by market value, repaid AED4.5bn (US$1.2bn) to the ministry out of its own cash reserves, the statement said.

The repayment was made given the bank's "very strong financial position by end of 2012," the statement added.

The bank is the largest UAE institution so far to fully repay its bonds, which boosted Tier 2, or supplementary, capital.

Other banks have also been acting to address the bonds.

National Bank of Abu Dhabi originally converted AED5.6bn of support into bonds but repaid AED2.6bn last year, while National Bank of Ras Al Khaimah , the UAE's ninth-largest bank by market value, repaid all of its AED684.5m of support during 2012.

Last week, Abu Dhabi Commercial Bank raised a US$750m subordinated bond as part of a US$1.5bn two-tranche debt offering. Subordinated debt can be counted towards a bank's Tier 2 capital ratio.

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