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Tue 24 May 2011 07:40 PM

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Moody's says unsure over future of Dubai Bank

Ratings agency wants more clarity on the Dubai Gov't's bailout of struggling Islamic lender

Moody's says unsure over future of Dubai Bank
Dubai Bank, Dubai-Bank

Moody's said on Tuesday it wants more clarity on the Dubai government's bailout of struggling Islamic lender Dubai Bank before taking ratings action.

The ratings agency put the troubled lender on review with direction uncertain after Dubai's government took control of the lender and said it would give it a capital injection.

The aim of the bailout was to protect the interest of all depositors and ensure that Dubai Bank's operations remain uninterrupted, the government said.

But Moody's noted: "The aforementioned capital injection however has yet to occur and there is still a lack of explicit information regarding its amount and timing.

"Although the government's announcement is viewed as a credit positive, the standalone ratings could still be lowered if the loan portfolio cleanup and recapitalisation is not concluded in the immediate future," Moody's added in a statement.

"On the other hand, Dubai Bank's standalone ratings could be upgraded if we were to see a swift and strong restoration of its financial condition, though the probability of an immediate upgrade seems moderate," it said.

During the review process, Moody's will also consider whether its assumption of government support embedded in the bank's issuer ratings is appropriate.

The review will also consider the possibility of a merger with another bank, an option that could be deployed as part of the support effort, Moody's said.

At the end of 2009, Dubai Bank had total assets of AED17.4 billion ($4.74 billion) against total liabilities of AED15.7 billion. It made a loss of AED290.6 million.

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