Dubai bank may shoulder refinancing needs of some state-linked firms, warns HC
Emirates NBD, the UAE’s biggest bank by assets, had its
price estimate cut 20 percent at HC Brokerage, citing rising loan-loss charges
and a possible acquisition of mortgage lender Amlak Finance.
“We think an Emirates NBD acquisition of Amlak has become
more likely and believe Emirates NBD may also have to absorb some of the refinancing
needs of government-owned entities in 2012, particularly if European and US
banks reduce their exposure to the region,” analysts Jaap Meijer and Kareem
Ghaly wrote in a note dated today.
The shares of Amlak Finance, an Islamic mortgage company
part-owned by Emaar Properties PJSC, were suspended in November 2008 after the
global credit crisis blocked their access to borrowings. A government committee
studying an overhaul of Amlak “continues to explore the possibilities of a
balance-sheet restructuring,” the company said in November.
Emirates NBD’s price estimate was cut to AED3.9 from AED4.9
“to reflect the bank’s relatively poor earnings outlook, a potential increase
in the concentration risk of its loan portfolios, the negative impact of the
Dubai Bank acquisition, and a potential acquisition of Amlak,” HC Brokerage
said. The recommendation on the shares was lowered to “neutral” from
Emirates NBD is one of the biggest creditors to Dubai World,
one of the emirate’s three main state-owned holding companies that reached a
deal in March to delay payments on $25bn of loans. It is also a key lender to
units of Dubai Holding, one of whose investment companies is in talks with banks
to reschedule at least $10bn of liabilities. The bank in October took over the
unprofitable Dubai Bank on orders from the emirate’s ruler.
Emirates NBD may need to set aside as much as AED8bn ($2.2bn)
by the end of 2013 to cover for bad loans, Goldman Sachs Group said in a note