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Amlak deal would hit Dubai’s ENBD Tier 1, says broker

Emirates NBD, Dubai's largest bank by assets, could see its Tier 1 capital ratio fall by nearly 1.1 percentage points if it is forced to absorb embattled property lender Amlak Finance, HC Securities said on Sunday.

December 18, 2011 11:39 by

ENBD, which is 56-percent owned by the government of Dubai, has already taken on one debt-ridden financial institution, Dubai Bank, at the behest of the authorities — resulting in a Tier 1 drop of 1 percentage point under the Bank of International Settlements (BIS) ratios, the brokerage said in a research note.

“We expect a government solution for Amlak, which, due to its very sizeable property investment portfolio, is in an even worse position than Dubai Bank was,” HC said.

“However, even if ENBD were to acquire Amlak at the same terms as Dubai Bank (i.e. for virtually nothing), its capital ratios would suffer a substantial negative impact (1.08 percentage points on BIS ratio, 0.75 percentage points on Tier 1 under Basel II, and 0.65 percentage points on common equity Tier 1 under Basel III).”

ENBD’s shares closed Thursday at 3.17 dirhams ($0.86). ($1 = 3.6730 UAE dirhams) (Reporting by David French; Editing by Sitaraman Shankar)

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