Troubled Islamic lender Dubai Bank has been taken over by the emirate’s government
Emaar Properties may write down the entire value of its AED172m
($47m) stake in Dubai Bank after the emirate’s government took control of the
lender by boosting its capital, EFG Hermes said.
The builder of the world’s tallest tower in Dubai is likely
to take the writedown in the second quarter, analyst Jad Abbas wrote in a note
to clients dated yesterday. Emaar held 30 percent of Dubai bank, while
state-owned Dubai Holding had the remaining 70 percent.
Yesterday, Dubai’s government said it will provide capital
to Dubai Bank that will result in the state owning 100 percent of the lender.
The government hasn’t yet decided whether the bank will be run on a stand-alone
basis or be merged with another financial institution in which the government
holds a stake.
The writedown would prompt EFG to lower its full-year profit
forecast for Emaar to AED3.36bn, according to the note. The bank said the
transaction is in line with Emaar’s goal of focusing on its main property
The takeover may signal that the state will seek a
resolution for Amlak Finance, another Dubai-based Islamic lender partially
owned by Emaar, Abbas said.
Shares of the mortgage lender were halted from trading in
November 2008 after the global financial crisis blocked its access to funding.
“Emaar’s financial associates have been the source of
continued provisioning and impairments over previous quarters,” he wrote.
“Hence, the exclusion of Dubai Bank will positively impact future associate
Emaar “understands” that the government takeover will
completely dilute its shareholding in Dubai Bank, a company spokesperson said
in an emailed statement. The book value of the investment is AED172m, the
“We are awaiting further directives and details from the
Dubai government in respect to the takeover,” the Emaar spokesperson said.
Amlak is a more important issue for Emaar, the analyst
wrote. Emaar’s 45 percent stake in Amlak is valued at AED795m, while loans
extended to Amlak by Emaar are estimated at AED690m.