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68595
Wed, 07/01/2009 - 15:03
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Emirates NBD gets Dh4b cash infusion
Dubai, July 1, 2009 (WAM) - In a last-minute solution to a big funding shortfall, Emirates NBD, the nation’s largest banking group by assets, met a UAE Central Bank deadline requiring local banks to strengthen their capital bases to cushion against increasing loan defaults.
The Dubai-based lender announced on Tuesday that it had issued Dh4 billion in so-called Tier 1 debt securities to the Dubai government’s investment arm, the Investment Corporation of Dubai, or ICD. Money from the sale of the securities will increase the bank’s Tier 1 capital to more than 11 per cent of its total assets.
The Central Bank required UAE banks to meet this 11 per cent minimum by June 30, as a condition for receiving government deposits last fall when many local banks were facing serious liquidity problems due to the freezing of international capital markets.
Like most other banks, Emirates NBD accepted government deposits to strengthen its balance sheet during the downturn. But as of March 31, its Tier 1 capital was 9.7 per cent of its total assets — well below the government threshold.
“As the largest bank in the UAE, it is essential that Emirates NBD is well capitalised. Through this issuance we will continue to build on and maximise the benefits of the merger,” Emirates NBD Chairman Ahmed Humaid Al Tayer said in a statement. Emirates Bank and National Bank of Dubai expect this year to complete the merger process they started in 2007 to form Emirates NBD.
The bank’s newly issued securities have a fixed-rate coupon of 6.45 per cent for the first five years before they change to a floating-rate coupon. The UAE Central Bank confirmed the bank’s Tier 1 capital status, for the purposes of capital adequacy.
The central bank will raise its Tier 1 capital requirement for UAE banks to 12 per cent by the end of next June. “A strong banking system is essential for the continued development of the UAE, and through this injection of Tier 1 Capital, the ICD is able to demonstrate its full commitment to Emirates NBD,” said Mohammed Ibrahim Al-Shaibani, Executive Director & Chief Executive Officer of the ICD.
The Government of Dubai owns 56.6 per cent of Emirates NBD, through the ICD, while 39 per cent of the stock is traded on Dubai Financial Market. “As a bank you have to increase capital to face challenging time,” said Mahdi Mattar, an analyst at investment bank Shuaa Capital. A boost to any bank’s capital base gives it “a cushion if the bank’s non-performing loans increase,” he said.
Dubai issued a $10 billion bond in February aimed at helping banks and other state-owned companies. Emirates NBD said in April it would boost its capital ratio by issuing Dh3.5 billion worth of debt notes in the second quarter.
Emirates NBD reported total assets at Dh282.4 billion at the end of 2008, and it has a combined market share of 20.5 per cent in the UAE. The bank’s shares fell by 0.6 per cent to Dh3.5 on the Dubai Financial Market on Tuesday. – Khaleej Times
The Dubai-based lender announced on Tuesday that it had issued Dh4 billion in so-called Tier 1 debt securities to the Dubai government’s investment arm, the Investment Corporation of Dubai, or ICD. Money from the sale of the securities will increase the bank’s Tier 1 capital to more than 11 per cent of its total assets.
The Central Bank required UAE banks to meet this 11 per cent minimum by June 30, as a condition for receiving government deposits last fall when many local banks were facing serious liquidity problems due to the freezing of international capital markets.
Like most other banks, Emirates NBD accepted government deposits to strengthen its balance sheet during the downturn. But as of March 31, its Tier 1 capital was 9.7 per cent of its total assets — well below the government threshold.
“As the largest bank in the UAE, it is essential that Emirates NBD is well capitalised. Through this issuance we will continue to build on and maximise the benefits of the merger,” Emirates NBD Chairman Ahmed Humaid Al Tayer said in a statement. Emirates Bank and National Bank of Dubai expect this year to complete the merger process they started in 2007 to form Emirates NBD.
The bank’s newly issued securities have a fixed-rate coupon of 6.45 per cent for the first five years before they change to a floating-rate coupon. The UAE Central Bank confirmed the bank’s Tier 1 capital status, for the purposes of capital adequacy.
The central bank will raise its Tier 1 capital requirement for UAE banks to 12 per cent by the end of next June. “A strong banking system is essential for the continued development of the UAE, and through this injection of Tier 1 Capital, the ICD is able to demonstrate its full commitment to Emirates NBD,” said Mohammed Ibrahim Al-Shaibani, Executive Director & Chief Executive Officer of the ICD.
The Government of Dubai owns 56.6 per cent of Emirates NBD, through the ICD, while 39 per cent of the stock is traded on Dubai Financial Market. “As a bank you have to increase capital to face challenging time,” said Mahdi Mattar, an analyst at investment bank Shuaa Capital. A boost to any bank’s capital base gives it “a cushion if the bank’s non-performing loans increase,” he said.
Dubai issued a $10 billion bond in February aimed at helping banks and other state-owned companies. Emirates NBD said in April it would boost its capital ratio by issuing Dh3.5 billion worth of debt notes in the second quarter.
Emirates NBD reported total assets at Dh282.4 billion at the end of 2008, and it has a combined market share of 20.5 per cent in the UAE. The bank’s shares fell by 0.6 per cent to Dh3.5 on the Dubai Financial Market on Tuesday. – Khaleej Times
