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64216
Thu, 06/04/2009 - 13:58
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DIB maintains high liquidity
Dubai Islamic Bank (DIB), the largest Islamic bank in the world, has Dh15 billion on deposit with the Central Bank. This is Dh10bn more than the statutory minimum required, analysts said. The listed bank boasts a 11.1 per cent Tier 1 ratio as of March 31, 2009 [as per Basel II].
The above figures have been deduced after an analysis of the bank's financials and they are in contrast to most UAE banks that were suffering from a liquidity squeeze towards the end of Q1.
"While most large banks have reduced their Central Bank reserves, DIB has increased its deposits by Dh9bn during Q1 to Dh14bn," Mohamad Hawa, a research analyst with Credit Suisse, said in response to an Emirates Business query on DIB's financials.
While the cash and balances with Central Bank were to the tune of Dh6.328bn as of December-end 2008, they soared to Dh15.507bn as of March-end 2009. Some analysts pointed out that DIB cannot afford to disturb the risk weightage of its assets as its Tier 1 capital ratio is at the brim.
"Cash and balances with the Central Bank enjoy zero risk weightage and hence, will not dilute the ratio," analysts said. Banks in the UAE are required to achieve a Tier 1 capital ratio of 11 per cent by this month end and 12 per cent by end of June, 2010.
On the recent buy-back of Sukuks, Hawa said: "DIB currently has high liquidity and would like to benefit from the low market price of its Sukuk to make a profit and support capitalisation levels, especially while we are not experiencing increasing lending appetite."
Last month, DIB announced a partial cash tender offer for up to US$200 million (Dh734m) of its US$750m Trust Certificates due 2012, issued by DIB Sukuk Company. Holders of the certificates were invited to tender for cash at a price of not less than 86 per cent and not more than 90 per cent of the face value.
The aggregate face amount of certificates accepted by DIB for purchase through the auction was to the tune of US$50.62m only. The auction was struck at 88 per cent of the face value of the certificate. "We think the bank has made a profit of approximately US$6m out of the floating coupons and trading yield mismatch. We think bond holders are relaxed about the credit risk of the bank and have refrained from offering more than US$50m at the offered prices," Hawa noted.
DIB in its extraordinary general meeting in April approved the increase of the bank's capital by Dh3bn over a five-year period. "By approving the increase, shareholders have supported the bank's plan to protect its lending position in this time of crisis," DIB Chairman Mohammed Ibrahim Al Shaibani said last month.
The above figures have been deduced after an analysis of the bank's financials and they are in contrast to most UAE banks that were suffering from a liquidity squeeze towards the end of Q1.
"While most large banks have reduced their Central Bank reserves, DIB has increased its deposits by Dh9bn during Q1 to Dh14bn," Mohamad Hawa, a research analyst with Credit Suisse, said in response to an Emirates Business query on DIB's financials.
While the cash and balances with Central Bank were to the tune of Dh6.328bn as of December-end 2008, they soared to Dh15.507bn as of March-end 2009. Some analysts pointed out that DIB cannot afford to disturb the risk weightage of its assets as its Tier 1 capital ratio is at the brim.
"Cash and balances with the Central Bank enjoy zero risk weightage and hence, will not dilute the ratio," analysts said. Banks in the UAE are required to achieve a Tier 1 capital ratio of 11 per cent by this month end and 12 per cent by end of June, 2010.
On the recent buy-back of Sukuks, Hawa said: "DIB currently has high liquidity and would like to benefit from the low market price of its Sukuk to make a profit and support capitalisation levels, especially while we are not experiencing increasing lending appetite."
Last month, DIB announced a partial cash tender offer for up to US$200 million (Dh734m) of its US$750m Trust Certificates due 2012, issued by DIB Sukuk Company. Holders of the certificates were invited to tender for cash at a price of not less than 86 per cent and not more than 90 per cent of the face value.
The aggregate face amount of certificates accepted by DIB for purchase through the auction was to the tune of US$50.62m only. The auction was struck at 88 per cent of the face value of the certificate. "We think the bank has made a profit of approximately US$6m out of the floating coupons and trading yield mismatch. We think bond holders are relaxed about the credit risk of the bank and have refrained from offering more than US$50m at the offered prices," Hawa noted.
DIB in its extraordinary general meeting in April approved the increase of the bank's capital by Dh3bn over a five-year period. "By approving the increase, shareholders have supported the bank's plan to protect its lending position in this time of crisis," DIB Chairman Mohammed Ibrahim Al Shaibani said last month.
