Dubai Bank takeover won’t hit profits, says ENBD

Emirates NBD paid 'fair value' for troubled Islamic lender after state bailout
Dubai Bank takeover won’t hit profits, says ENBD
ENBD has existing Islamic operations through its affiliate Emirates Islamic Bank
By Shane McGinley
Thu 13 Oct 2011 09:11 AM

Emirates NBD, the largest bank in the United Arab Emirates
by assets, said its takeover of troubled Islamic lender Dubai bank will not
impact its profitability or loan portfolio.

The
takeover “will not affect the profit and loss, the non-performing loan
percentages due to the transaction structure and support provided by the
government of Dubai,” said CEO Rick Pudner.

“Dubai
Bank will be capitalised by Emirates NBD to the extent considered necessary and
this will have negligible impact on the group’s overall capital ratios,” he
said.

Chief
financial officer Surya Subramanian said the takeover was paid at “fair value”,
without specifying the value of the deal.

The Dubai government, which owns 56 percent of ENBD, said this
week the lender will take over Dubai Bank as part of a plan to strengthen the
emirate’s banking industry.

Dubai Bank, which was 70 percent owned by Dubai Holding and
30 percent by Emaar Properties, was nationalised in May after loan losses
increased. The government said it had injected an unspecified amount of capital
to protect depositors' interests.

Emaar Properties took a writedown of AED172m on the investment
the same month.

Dubai Bank has not reported figures since 2009, when it had
total assets of AED17.4bn against total liabilities of AED15.7bn.  The lender posted loss of AED291m ($79m) that
year.

EFG-Hermes Holding said this week that ENBD would pay cash
for the acquisition of state-owned Dubai Bank, lowering its total capital adequacy
ratio by 100 basis points, or 1 percentage point.

“Emirates NBD has the capacity to absorb Dubai Bank,” the
investment bank said.

ENBD
has existing Islamic operations through its affiliate Emirates Islamic Bank
(EIB), but Pudner said there were no plans to merge the division with Dubai Bank.

"As it stands we see Dubai Bank remaining as a fully-owned
subsidiary with its own brand identity,” he said, but added that branch or job
cuts had not been ruled out.

“Eventually we will look at enhancing synergies within the
group.”

Dubai's ruler named his uncle and close adviser Sheikh Ahmed
bin Saeed al-Maktoum as chairman of Emirates NBD in late June, replacing Ahmed
Humaid Al Tayer, a prominent Dubai business and political figure.

Sheikh Ahmed said last month that local banks in Dubai have sufficient
liquidity to weather a second global downturn.

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