Text size:

  • Small
  • Normal
  • Large

Tamweel loan book at five-year low after mortgage cap

Tamweel's earnings rose in the first quarter, but a sharp decrease in the size of its lending book set its shares falling.

Tamweel's loan book shrank to its lowest level in five years during the first quarter of this year as competition from commercial lenders ate into its core business and a Central Bank cap on mortgages deterred new property buyers.

The Islamic mortgage lender reported net profits of Dh20.5 million (US$5.6m) during the first quarter of the year, representing a 13.4 per cent increase in profits compared with the same period a year earlier, buoyed by a falling share of profits paid out to investors.

The improved profits beat analysts' estimates of Dh19.5m.

But Islamic financing assets fell by 2.6 per cent to Dh9.08 billion, representing the lowest level of mortgages on the company's books since June 2008. Tamweel's shares fell 2.5 per cent to Dh1.15 each after the earnings were released.

"For me the disappointment would be the contraction in the loan book," said Shabbir Malik, a financial analyst at EFG Hermes. "This shows that the competition from commercial banks is making it difficult for Tamweel to grow."

Customers' repayments of existing mortgages appeared to have also contributed to the decrease in Tamweel's loan portfolio, Mr Malik added.

During the quarter, the Central Bank said it would impose a cap on mortgage lending by limiting loan-to-value ratios on property purchases.

Estate agents said that uncertainty over the new regulation caused numbers of mortgage buyers to disappear almost overnight. Large numbers of cash buyers have pushed up property prices across Dubai in the meantime.

After lobbying by the UAE Banks Federation, the Central Bank agreed to amend the limits to allow for a higher cap than that initially proposed.

Tamweel reported a 7.4 per cent decrease in operating income to Dh149m, with charges on bad debts more than doubling to Dh19.9m.

The company is currently being targeted for acquisition by its majority shareholder Dubai Islamic Bank, which is seeking to buy out the 41.8 per cent of the company's shares which it does not currently own.

DIB has received regulatory and shareholder approval to offer its own shares to Tamweel's minority shareholders.

The takeover will reduce Tamweel's cost of funding and allow it to compete more effectively with commercial banks, Mr Malik added.



Back to the top

More articles

Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 A sign points the way to an outdoor market popular with German visitors on the Polish side of the German-Polish border. Sean Gallup / Getty Images

In pictures: A decade since the European Union went east

May 1 will mark 10 years since the European Union expanded east, taking in countries like Poland, the Czech Republic and the Baltic states as new members. And though the border region between Germany and Poland is flourishing with trade and cultural exchange, the open border has also brought a sharp rise in crime.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National