Thursday 28 March 2024
 
»
 
»
Story

Abu Dhabi helps Dubai with bank bailout

Dubai , February 15, 2012

The acquisition of a struggling Islamic lender by Dubai's largest bank Emirates NBD was bankrolled in part by neighbour Abu Dhabi, which helped Dubai avoid default just over two years ago, ENBD's finance chief said on Wednesday.

In October, ENBD was ordered by Dubai's ruler to take over loss-making Dubai Bank, which had been rescued by the emirate's government earlier in 2011.

ENBD, whose fourth-quarter results were hit by its exposure to Dubai-linked entities, said the UAE's finance ministry gave it a 2.8-billion dirhams ($762.3 million), eight-year loan at below market rates to facilitate the purchase of Dubai Bank.

"We received a liquidity injection from the UAE Ministry of Finance," Surya Subramanian, ENBD's chief financial officer, said on a conference call. "The Dubai Bank acquisition had the support of both Dubai and Abu Dhabi governments."

Dubai rattled global markets in 2009 when it requested a standstill on $25 billion in debt at flagship conglomerate Dubai World in the wake of a property collapse. Abu Dhabi rode to Dubai's rescue with a last-minute bailout which helped it avert default on an Islamic bond.

Abu Dhabi sits on 10 percent of global oil reserves, accounts for 90 percent of UAE oil output, and is the biggest contributor to the UAE treasury.

As part of the Dubai Bank transaction, Dubai's government has provided ENBD a 768-million dirham guarantee over a period of seven years against losses.

Abu Dhabi's participation in a bailout at its glitzier neighbour comes just over two years after it lent Dubai $10 billion. The UAE central bank had earlier in 2009 bought up $10 billion of Dubai bonds.

Earlier on Wednesday, ENBD said fourth-quarter net profit fell 62 percent to 152 million dirhams as provisions weighed heavily for the second consecutive quarter. That compared with profit of 403 million dirhams in the same period a year earlier.

It declined to specify the nature of these provisions but has said that there is no profit-and-loss implication from the Dubai Bank deal.  - Reuters




Tags: abu dhabi | Dubai | Dubai Bank | bail out | ENBD |

More Finance & Capital Market Stories

calendarCalendar of Events

Ads