Business | Banking

Merrill downgrades DIB citing Deyaar

Dubai Islamic Bank (DIB), the UAE's biggest bank complying with Muslim banking rules, was cut to "neutral" from "buy" at Merrill Lynch & Co, which cited a corruption probe affecting a unit's chief executive.

  • Bloomberg
  • Published: 00:15 May 21, 2008
  • Gulf News

Dubai: Dubai Islamic Bank (DIB), the UAE's biggest bank complying with Muslim banking rules, was cut to "neutral" from "buy" at Merrill Lynch & Co, which cited a corruption probe affecting a unit's chief executive.

"We are downgrading DIB due to our concerns about an embezzlement case at its real estate associate Deyaar, which it owns 41 per cent of," Merrill Lynch analysts, including Munir Shahin, wrote in a note to clients. An increase in bad loans at the bank is also a worry, they said.

Dubai's public prosecutors, which are probing Deyaar Development's former CEO Zack Shahin for fraud, is likely to take the case to court, Deyaar's chairman Nasser Bin Hassan Al Shaikh said on May 18. The investigation into alleged irregularities will have no impact on the future profitability of the company, he said on May 1.

Shahin and two other officials at the real-estate developer, Dubai's third-biggest by market value, are being questioned in connection with an alleged embezzlement. The probe may result in more arrests, Dubai Attorney General Essam Al Humaidan said on May 11.

Dubai Islamic shares fell 2.5 per cent to Dh8.98 in Dubai trading. The stock has declined 6.1 per cent this year.

No clarity

"There is still not enough clarity about the case for us to comfortably judge the performance of the business, which should at least face considerable reputation damage," Shahin and London-based analyst Karthik Shankaran said.

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