x Abu Dhabi, UAEFriday 21 July 2017

Hope for investors in two mortgage lenders

Light at end of tunnel for Tamweel, Amlak with negotiations

There is again hope on the horizon for shareholders of the mortgage financiers Tamweel and Amlak. Dubai Islamic Bank (DIB), the largest Islamic lender in the country, may take over Tamweel and is in negotiations with the Sharia-compliant mortgage provider's creditors to restructure its debts, Arabic media reports said. DIB confirmed it was evaluating the option of taking a larger stake in Tamweel in a statement to the Dubai Financial Market (DFM) late yesterday, without giving further details. DIB now owns 19.8 per cent of the mortgage provider.

Meanwhile, Tamweel's rival Amlak Finance could be taken over by a Dubai government-related entity. For shareholders, this assures the companies will not go into default and investors will conceivably recoup some of their money, which has been stuck in shares that cannot be sold for more than 18 months. It was previously thought the mortgage lenders would merge and possibly be recapitalised by the UAE Government, but those plans appear to have been scrapped.

"It's definitely positive. It gives (shareholders of Tamweel and Amlak) a hope that the companies will not go bankrupt," said Majid Azzam, a property market analyst at Al Futtaim HC Securities in Dubai. But for the broader mortgage market there are still questions about how the firms will be recapitalised. The previous model, in which a stand-alone mortgage lender does not have the ability to tap into customers' deposits as a source of funding, has failed.

"It's good that the debt is restructured but it remains to be seen how they will be capitalised," Mr Azzam said. Tamweel and Amlak have been hit hard by the downturn in Dubai's once-booming property sector. Shares in both were suspended in November 2008 and have not traded on the DFM since. Dubai Islamic Bank's stock ended trading yesterday ahead by 0.48 per cent, at Dh2.10. skhan@thenational.ae