Amlak Finance announced a third-quarter loss of Dh45 million (US$12.2m) as the largest property financier in the Middle East by assets continued to wait for decisions on its proposed merger with its counterpart Tamweel. The result was Amlak's third consecutive quarterly deficit this year, bringing its loss for the year through the end of September to Dh178m.
"As expected, Q3 was another challenging quarter," said Ali Ibrahim Mohammed, the vice chairman of Amlak. "However, during this difficult year, we managed to restructure our balance sheet to show a much healthier position now than in the beginning of the year." Amlak's total assets were Dh14.7 billion at the end of September and its financing portfolio totalled Dh9.3bn compared with Dh 15.7bn and Dh9.8bn, respectively, in the same period a year earlier.
Amlak and Tamweel were among the first companies to feel the brunt of the slowdown in Dubai's property market caused by the global economic crisis. The Government responded in November last year by announcing plans to merge the two and suspending their shares. Neither company has written a home loan since and details of the merger plans have yet to come to light. Tamweel, the country's second-largest home finance company, last week reported a third-quarter profit of Dh10m, ending three quarters of losses.
The company's chairman, Sheikh Khaled bin Zayed, also said that shareholders would be invited to an extraordinary meeting, possibly as early as next January, to approve final restructuring proposals from a Government steering committee. He also said that the Government would increase the capital of the merged lender by about Dh2bn. Analysts have said that any merged entity would have to have enough capital from the Government to allow it to kick-start the UAE mortgage market. Amlak's earnings, coming amid a bumpy financial week for Dubai, included no details about the proposed merger.
"We are also close to a final announcement by the Federal Government regarding their decision, which will further fortify our business operations and investor confidence," Mr Mohammed said. "We have also been working closely with the ministerial committee leading the Amlak and Tamweel restructuring plan, which once complete will emerge as a stronger financial services organisation playing a leading role in the mortgage market and the UAE real estate industry as a whole."
Analysts have argued that Tamweel and Amlak need to be given a full banking license to allow them to take deposits from customers rather than rely on debt markets as they did before. "If these two entities merge and are granted a full banking licence, that should help address their funding issues. If cost savings are made where there is duplication and they start to lend conservatively again, then they should have a future," said Robert Thursfield, the director of financial institutions at Fitch Ratings.
Some analysts believe that the revival of Amlak and Tamweel are necessary for the recovery of Dubai's housing market, where property prices have fallen by as much as half from their peak last year. The companies accounted for about two thirds of Dubai mortgages during the property boom. That share has fallen to about 45 per cent, analysts say. Amlak's operational profit before provisions and impairments was Dh39m for the nine months ended September 30 and total provisions for its financing business stood at Dh313m cumulatively.
Impairments on corporate and international investments were Dh115m, bringing its overall balance sheet provisions to Dh428m at the end of September. @Email:firstname.lastname@example.org