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Tamweel in profit, Amlak prunes losses

While a lower depositors' share of profit and general and administrative expenses helped Tamweel return to profit, lower depositors' share of profit along with lower impairment allowances and operating expenses helped Amlak Finance prune its loss for the first quarter of the current year to a mere Dh2.7 million from Dh68.056m the company posted for the same period last year.

Tamweel has been able to make a turnaround in its prospects as the company returned to profitability with a net profit of Dh5.132m. The drop in depositors' share of profit by about Dh50m, compared with the same period last year, has been instrumental in the company closing the period in the black.

In the case of Amlak , while the income from financing and investing for the first quarter was down to Dh160m from Dh202m, the impairment allowances dropped from about Dh79m to Dh31.35m between the two quarters. More importantly, the profit share distribution to depositors fell from Dh147m to Dh119.345m during the period.

All these factors have played a big role in bringing down the loss for the company from Dh68.056m in the first quarter of 2009 to Dh2.703m in the first quarter of the current year.

The first quarter results of these two Islamic mortgage finance companies that used to control more than 60 per cent of the mortgage finance needs of the market until the recession that triggered talks on their merger, were eagerly awaited by the market.

All sorts of rumours have been making rounds in the market on the fate of Tamweel and Amlak , with a recent report suggesting that Dubai Islamic Bank (DIB) is holding talks with Tamweel 's creditors for a possible bail-out of the mortgage finance company.

The UAE Government has been working for the past 19 months on a plan to combine the two Islamic finance companies, which relied on wholesale borrowing to fund their lending, since the credit crisis cut off their funding. Dubai property prices have slumped more than 50 per cent from their peak in August 2008 as mortgages dried up, according to estimates from Colliers International.

Tamweel cut its operating costs by 28 per cent to Dh28m. Tamweel had Dh11.4 billion of assets at the end of March, including bank balances and cash of Dh709.4m. Amlak 's assets were valued at Dh13.9bn, including Dh729.6m in cash and balances with banks.

"If they've actually recovered or the worst is over then they should have a clearer path towards a merger, a standalone scenario or a third party coming in," said Saud Masud, head of research and senior real estate analyst at UBS in Dubai.

JPMorgan Chase & Co is advising on the merger. NM Rothschild & Sons is counselling Amlak on its valuation, while Nomura Holdings is helping Tamweel . (With inputs from agencies)

By CL Jose

© Emirates Business 24/7 2010