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Dubai's ENBD Seeks Approval to Merge Islamic Units-Sources
Emirates NBD, Dubai's largest lender, is seeking approval from three government bodies to merge its two Islamic banking units, sources told Reuters on Monday.
April 9, 2012 4:53 by kippreport
Emirates NBD, Dubai’s largest lender, is seeking approval from three government bodies to merge its two Islamic banking units, sources told Reuters on Monday.
The bank is aiming to combine its Emirates Islamic Bank arm with Dubai Bank, the debt-laden lender acquired in October at the behest of the Dubai government. The rationalisation has been expected by the market since the takeover was announced.
“Emirates NBD is now fine-tuning the legal paperwork ahead of the merger of the two banks,” one source with knowledge of the matter said, speaking on condition of anonymity.
“It’s a matter of a week or two, so by the end of the month,” he added when asked about the timeframe for receiving the approvals.
As well as requiring the assent of the United Arab Emirates’ central bank, ENBD also needs the go-ahead from the country’s finance ministry and the Dubai government because of support provided to help it absorb Dubai Bank, which had to be rescued earlier in 2011 because of its excessive debt burden.
This is because a 2.8-billion-dirham ($762.3 million) loan given by the ministry and 768 million dirhams of guarantees from Dubai would be voided if Dubai Bank ceases to exist as a legal entity – as it would do when the two units are merged.
The approvals would ensure these mechanisms are retained in the combined form and not lost because of legal technicalities, the source said.
Emirates NBD declined to comment on the merger approvals but said in an earlier statement it had finalised the selection of a unified management team and an executive committee which would manage both banks.
Jamal bin Ghalaita, previously chief executive of EIB, would lead the combined management team, ENBD said at the end of last month.
Abdullah Showaiter will head corporate and investment banking, with Faisal Aqil leading retail banking and private banking, Arabic daily newspaper Al Khaleej said in a report on Monday, citing an unnamed source.
The paper added the merger of the two units, approved by an internal committee on Sunday, would produce licensing cost savings of around 350 million dirhams.
ENBD, which has been grappling with impairments linked to Dubai government-related entities, plans to lay off up to 15 percent of its 8,000-strong workforce, sources told Reuters earlier this month.
The bank, 55.6 percent state-owned through the Investment Corporation of Dubai and created in a 2007 merger between Emirates International Bank and National Bank of Dubai, saw provisions rise 56 percent in 2011 to 4.98 billion dirhams.
($1 = 3.6730 UAE dirhams)
(Additional Reporting by Amena Bakr; Writing by David French; Editing by Sitaraman Shankar)