The Abu Dhabi-based Real Estate Bank, which Islamic mortgage lenders Amlak Finance and Tamweel are to merge under, is to combine with the Emirates Industrial Bank (EIB) to create the UAE’s biggest home finance company, state news agency WAM reported late on Sunday.
WAM said the UAE’s Ministerial Council for Services (MCS) has approved the merger of the Real Estate Bank and the EIB, which will be called the Emirates Development Bank.
The news agency did not give any further details.
The government-owned EIB finances industrial projects with licences issued by the UAE Ministry of Finance and Industry, according to its website.
The Real Estate Bank is also government-owned and supports the real estate sector and provides housing for UAE nationals, according to its website.
Mohamed Ali Alabbar, chairman of Emaar Properties and a member of Dubai's Executive Council, said on Monday the federal government would provide fund to the Emirates Development Bank.
"The details are being worked out but the new entity will be supported by capital and funding," he said.
Emaar, which owns a 45 percent stake in Amlak, will retain a share in the new merged entity, Alabbar said.
The finance ministry said on Sunday that Amlak and Tamweel would merge under the Real Estate Bank in the first sign of federal government intervention in Dubai's troubled property sector.
Trading in both Amlak Finance and Tamweel, which have been struggling amid the global credit crunch, was suspended on Sunday after the finance ministry said it would supervise their merger under the Real Estate Bank to ensure a fair valuation and protect shareholders.
The combined market value of the firms is 2.5 billion dirhams ($681 million) - roughly one third of their worth since Oct. 4 when the two firms first announced merger plans.
Amlak’s shares have fallen 80 percent this year, while Tamweel’s shares have fallen 85 percent.
Speculation has grown, as the financial crisis squeezes credit and hits stocks and real estate markets, that the federal government may step in to help shore up confidence in Dubai.
Becoming a licensed bank would enable the two mortgage lenders to take deposits and access emergency federal funds. Amlak, the biggest Islamic mortgage lender in the UAE, cut off new loans this month.For all the latest banking and finance 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.