Emirates NBD is seeking approvals from shareholders and regulators to boost its foreign ownership limit to 40%
Emirates NBD raised the cap on foreign ownership from 5% to 20% on Monday and said it will seek shareholders’ approval to double the new limit. Shares jumped to the highest level since 2007.
Lenders in the six-nation Gulf Cooperation Council are trying to broaden the base of their investors as a combination of low oil prices, slowing economic growth and geopolitical upheavals drain inflows. First Abu Dhabi Bank, the biggest bank in the United Arab Emirates, proposed removing the limit after raising it to 40% in February.
“The news will bode well not only to Emirates NBD but also for the UAE markets as a whole,” said Ali El Adou, the head of asset management at Daman Investments in Dubai. "The indication to increase the FOL to 40% was more than what investors have been expecting.”
The move comes after Emirates NBD completed the acquisition of Turkey’s Denizbank AS for 15.48 billion lira ($2.65 billion) in July. The bank plans to raise its capital by $2 billion from an issue of new shares to help fund the deal.
The shares climbed 15% as of 12:15 pm in Dubai. The benchmark DFM General Index gained 4.2%.
Emirates NBD could be included in the emerging market benchmarks compiled by MSCI and FTSE Russell in the first half of next year, triggering inflows of about $426 million, according to estimates by Mohamad Al Hajj, an equities strategist at EFG-Hermes Holding SAE in Dubai.
Liquidity in the stock would have to pick up for it to meet the criteria required by the compilers, he said by email.
The increase in FOL “will strengthen the UAE’s proposition as one of the most attractive economies for foreign direct investment and contribute to increased liquidity and depth in the UAE’s capital markets,” Emirates NBD Chairman Sheikh Ahmed Bin Saeed Al Maktoum said in a statement.
Foreigners held 5% of Emirates NBD shares as of Sunday and Dubai’s government 55.76%, according stock exchange data.
“Having foreign investors is great for local companies because it really raises the bar in terms of the requirements for transparency, for corporate governance, for profitability,” Tarek Fadlallah, chief executive officer of the Middle East unit of Nomura Asset Management in Dubai, said in an interview with Bloomberg TV.