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Merger process still hanging in balance

Tuesday, Aug 17, 2010

Gulf News

Mortgage lender Tamweel back in the black while Amlak has reduced losses

The unfinished merger between Dubai's two mortgage lenders is not making any headway, as both are trying to regain lost ground due to the challenging market conditions.

Tamweel and Amlak — Dubai's two mortgage lenders, earlier entered into a merger process in 2008, just as the global financial crisis began to impact the property market. Later, a government committee was entrusted to explore merger options with the Real Estate Bank and Emirates Industrial Bank to create a mega bank. However the fate of the process is still hanging in the balance with no clear indications.Both companies have reduced losses while Tamweel has returned to the black successfully as reflected in its second quarter results.

"The government committee for Amlak 's affairs continues to explore the possibilities of a merger and balance sheet restructuring of the company. This has entailed a full review and assessment of the company's business operations and liquidity position," Amlak said in a statement.

"The Board of Directors along with the Governmental Committee is evaluating various options to secure sustainable funding for the Group in order to enable it to continue to meet its commitments."

While officials are tight-lipped on the issue, market analysts feel their return to the market could lift buying and selling activities.

Market conditions

"Although the loan-to-value ratio is still low and lending criteria is stringent, their [ Amlak and Tamweel] absence in the market is not helping anyone," Matthew Green, head of research and consultancy at CB Richard Ellis, told Gulf News.

"Easing of mortgage lending criteria could definitely help the market as prices are becoming attractive."

Tamweel yesterday reported Dh5 million net profit for the second quarter, after making additional provisions of Dh40 million from operational profits of Dh45 million for ‘potential delinquencies on its asset book' and ‘to offset the decline in the market value of its property investments', the company said in a statement.

At the quarter end, Islamic financing assets represented 92 per cent of the company's total assets, while investment in real estate was limited to only three per cent of total assets.

Meanwhile, Amlak posted a Dh5.06 million loss in the second quarter, improving from a Dh54.77 million loss in the corresponding period last year.

Its operating income declined to Dh168.92 million from Dh191.32 million.

By Saifur Rahman Business Editor

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