Dubai: The acquisition of 100 per cent shares in Dubai Bank by the Government of Dubai on Monday makes it a more acceptable candidate for merger, according to bankers and analysts.
"After recapitalisation and non-performing loan (NPL) cleansing, we see increased chance that Emirates NBD could acquire both Amlak, [an Islamic mortgage provider] and Dubai Bank on commercial terms," said Jaap Meijer, head of the bank team at AlembicHC.
Analysts said in the context of Investment Corporation of Dubai holding a 55.6 per cent stake in Emirates NBD, a consolidation of Dubai Bank with the group looks more likely.
Value destruction
"It appears to us that any acquisition [by Emirates NBD] will be done at commercial terms, and [under the new circumstances] we no longer have to fear for value destruction stemming from acquisitions."
However, Emirates NBD had denied all suggestions in the past that it was planning an acquisition of either of the institutions.
Analysts said Tuesday that with the government committing to recapitalise Dubai Bank and clean its balance sheet, it stands a better chance of being merged into a bigger and healthier institution.
Some observers said that the Dubai Government move will result in consolidation of some of the smaller banking entities.
"I believe that consolidation is needed, and I feel that is what the government should do with Dubai Bank. I would not want to speculate on who might be the right options for Dubai Bank, but suffice it to say that there are quite a few options that the government has within its own stable," said Abdul Kadir Hussain, chief executive of Mashreq Capital.
If merger is an option many say Dubai Islamic Bank and EIB are the potential partners. "Merging with DIB could be an option. I doubt if merging Dubai Bank with a bank like Noor is going to do any good or merger with EIB (100 per cent owned by ENBD) is even possible or feasible," said Naveed Ahmad, Senior Financial Analyst with Global Investment House.
