Business | Banking

Emirates Islamic Bank in talks to merge with Dubai Bank

Emirates Islamic Bank is in negotiations to merge with Dubai Bank, industry sources tell Gulf News

  • By Babu Das Augustine, Deputy Business Editor
  • Published: 15:29 October 3, 2010

Emirates Islamic Bank
  • Image Credit: Hadrian Hernandez/Gulf News
  • Emirates Islamic Bank (EIB) belongs to the Emirates NBD Group.

Dubai: Emirates Islamic Bank (EIB), belonging to the Emirates NBD Group, is in talks to merge with Dubai Bank, banking industry sources told Gulf News. Dubai Bank is a unit of the Dubai Banking Group, which is a part of Dubai Holding.

Arabic language newspaper Al Ittihad reported yesterday that EIB is in negotiations with Dubai Bank.

Confirming the talks, a source close to the neg-otiations told Gulf News that there have been discussions on these lines, including the possibility of bringing Amlak, an Islamic mortgage finance company, under the newly created banking entity following the merger.

Early stage

Both Emirates NBD, the parent of EIB, and Dubai Bank did not offer any official comments on the merger talks.

"These are not typical merger talks under normal circumstances. It is well known the balance sheets of both Dubai Bank and Amlak need to be strengthened to make them effective players in the market. Talks with EIB are at an early stage," said the source.

Banking sources close to the talks said yesterday that the move to bring Dubai Bank and Amlak under the EIB umbrella is part of a new plan to restructure and strengthen the balance sheets of smaller banking entities that face difficulties because of the slowdown.

Following an announcement in October 2008, Tamweel and Amlak, two Dubai Financial Market-listed mortgage finance companies, were scheduled to be merged. As a result trading in both stocks has since been suspended. In a recent move Dubai Islamic Bank increased its shareholding in Tamweel to 57.3 per cent, virtually ending the plans to merge Tamweel with Amlak.

Retail deposits

Prior to the financial slowdown that dried up their liquidity, Tamweel and Amlak together controlled more than 60 per cent of the mortgage market in the UAE.

The decision to merge the two companies was taken with the objective of converting them into an Islamic bank, which would have given them access to retail deposits allowing them to better manage their assets and liabilities.

With the decline in real estate prices and lack of wholesale funding available to these companies from the Islamic banking market, both these companies had suspended financing activities.

Revival

Following DIB's acquisition of controlling stakes in Tamweel, Wasim Saifi, Tamweel's Chief Executive Officer, said the company expects to restart providing mortgage fin-ancing within three to four weeks.

Banking sources said there are similar plans for Amlak where a larger banking entity created after a merger between EIB and Dubai Bank will acquire a controlling stake in Amlak and the mortgage firm will benefit from cheap funding from retail deposit resources of its parent bank.

EIB is 99.8 per cent controlled by Emirates NBD and had around Dh25.3 billion in assets at the end of March.

The Dubai Government holds about 29.8 per cent of Dubai Bank, which is controlled by the Dubai Banking Group, an affiliate of Dubai Holding.

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