Earnings at troubled Dubai mortgage firms Amlak and Tamweel improved in the first quarter, the companies said on Tuesday, potentially clearing the way to mergers or takeovers.
Trading in Dubai's two biggest mortgage firms has been suspended since 2008 when the government announced plans to merge and restructure the two Islamic lenders after the collapse of Dubai's real estate sector pushed them deep into the red.
In a much-delayed statement, Amlak said its first quarter net loss narrowed to AED3.1 million ($844,200) from AED68.3 million ($18.60 million) in the year-ago period due to lower impairments and operating expenses.
For Amlak it was the sixth consecutive quarterly loss.
Tamweel swung to a first quarter net profit of AED5.1 million ($1.39 million) compared to a AED40.7 million loss in the first quarter of 2009.
Analysts said the Islamic lenders' results remove some uncertainty about their future. Officials have considered merging the two firms or creating a four-way tie-up with other state-owned banks but current plans remain unknown.
"If they've actually recovered or the worst is over then they should have a clearer path towards a merger, a standalone scenario or a third party coming in," said Saud Masud, head of research and senior real estate analyst at UBS in Dubai.
Dubai Islamic Bank said earlier in June it may increase its one-fifth stake in Tamweel, as market talk intensified that the long-awaited merger between the UAE's largest mortgage lenders could be scrapped in favor of another financial group stepping in.
"Can they come out on their own? I still have my reservations," Masud said. "My view is that they need to be merged and if not they need investors to provide them with the right capital," he said.
Amlak said it was evaluating several options to secure funding for the group to allow it to meet its ongoing commitments, but didn't provide further details.
Amlak's chief executive and Tamweel's chairman wasn't immediately available to comment. (Reuters)For all the latest UAE news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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