x Abu Dhabi, UAEWednesday 24 January 2018

Tamweel, Amlak merger in 'vital phase'

A decision on the combining of Dubai's two largest mortgage providers is to be made soon.

The possible merger of Amlak Finance and Tamweel, Dubai's two largest home finance providers, has entered a vital phase, the Minister of Economy, Sultan al Mansouri, said. A special steering committee set up last month to advise the Government on how to revive the ailing lenders announced yesterday it is submitting a report with several strategies. In November the Government said it would merge the lenders but recent statements from the steering committee imply other ideas are now on the table. "The Government will evaluate various options and soon finalise its decision on the way forward for the two entities," said Mr al Mansouri, the head of the committee. "The process, which has now entered a vital phase, involves the participation of key stakeholders of Amlak and Tamweel in order to ensure unanimity of decision. "However, until the decision is finalised, it would not be appropriate to discuss details of these options and distort market expectations." Amlak and Tamweel have suffered over the past six months from falling property prices and an international credit shortage. The companies relied on short-term borrowings from banks to finance their long-term mortgages, leaving them particularly vulnerable to a credit shortage late last year. Yousuf Khan, an analyst at Fitch Ratings in Dubai, said: "The merger may not happen because at the end of the day, the merger does not solve the problem with the companies' business model." Analysts said it was also unclear what would happen to public shareholders of the companies, who own the majority of both. "I think some sort of structure could be found where the UAE authorities take a controlling stake, but not a majority," Mr Khan said. Trading in the companies' shares has been suspended. Tamweel shares last traded at Dh0.99 on Nov 20, down 88 per cent from a high of 8.55 last year. Amlak shares shed 82 per cent of their value, falling to Dh1.02 from Dh5.70 at the start of last year. According to Government statements made in November, Amlak and Tamweel were to merge under a new entity called Emirates Development Bank. The entity would be the result of a merger between Real Estate Bank and Emirates Industrial Bank. The Federal Government owns the majority of both. Speaking at the Federal National Council yesterday, the Minister of State for Financial Affairs, Obeid al Tayer said the merger of Emirates Industrial Bank and Real Estate Bank should be finalised by summer. But Mr al Tayer declined to comment on the future of Amlak and Tamweel. He said it was still undecided whether the Government would buy out non-government shareholders of EIB, which was 49 per cent held by a consortium of local banks and funds. Real Estate Bank is wholly owned by the Ministry of Finance. skhan@thenational.ae tpantin@thenational.ae