Emaar set to enter banking

Emaar Properties is in the process of setting up a bank, having procured an existing licence from a leading bank group, according to highly placed sources.

Separately, informed sources confirmed the Emirates Bank Group has sold one of its dormant licences to Emaar in April for a "very substantial" amount - "far in excess of Dh10-Dh15 million" - but declined to be more specific.

An Emaar's request had earlier been turned down by the UAE Central Bank. It now proposes to revive the dormant licence and establish a new bank on gaining the apex regulatory authority's approval.

Sources said Emaar is preparing to officially embark upon this project by end-year, although details on whether this would be a commercial or a housing development bank are not yet clear.

It is also not yet confirmed whether the development has been officially discussed and ratified by the Emaar board.

Neither Emaar nor Emirates Bank were available for official comment.

EBI was itself formed through the merger of Union Bank of Middle East Ltd, Emirates National Bank Ltd and Dubai Bank Ltd in the 1980s - with the group also taking over Middle East Bank in the 1990s - leaving the licences of these banks with the Emirates Bank Group.

Keeping these dormant licences alive entails a nominal annual payment. While getting a new licence from the central bank is not impossible 'in principle', the only new bank set up since past two decades is Abu Dhabi Islamic Bank.

There are several banks waiting to set up commercial operations in the UAE - a regional financial hub.

"Setting up a bank makes good sense for a property development company such as Emaar, given the number and scope of projects it is developing, and the volume of funds it would need and have access to," experts pointed out.

Emaar last year floated the UAE's first mortgage company, Amlak, in which it holds a majority stake. While Amlak would act as a natural extension of the group to look after its downstream needs, the new bank could serve upstream requirements, they explained.

Amlak will not only serve Emaar's businesses but eyes extended operations throughout the residential property market, filling a vital gap in the range of financial services available to potential homeowners.

The mortgager offers a range of products, including special loans for periods up to 25 years. It claims to offer potential residential property owners more cost-effective alternatives as compared to other existing loan schemes.

Emaar has, meanwhile, come out with other ambitious plans, including those it nurtures outside the UAE. Those comprise an entry into Indian property, and a move into Mideast telecommunications infrastructure, among others.

The Indian projects to come up in Mumbai, Delhi and elsewhere are slated to include shopping malls, golf courses, hotels, theme parks, etc.

Emaar has notched up firsts on several fronts. This is the first and the only UAE corporate entity at present to have opened up to foreign ownership (up to 20 per cent). It is also the first to have proposed a shares buyback, a move since officially implemented.