ENBD seeks approval for Islamic units' merger
Dubai, April 9, 2012
Emirates NBD, Dubai's largest lender, is seeking approval from three government bodies to merge its two Islamic banking units, sources told Reuters on Monday.
The bank is aiming to combine its Emirates Islamic Bank arm with Dubai Bank, the debt-laden lender acquired in October at the behest of the Dubai government. The rationalisation has been expected by the market since the takeover was announced.
'Emirates NBD is now fine-tuning the legal paperwork ahead of the merger of the two banks,' one source with knowledge of the matter said, speaking on condition of anonymity.
'It's a matter of a week or two, so by the end of the month,' he added when asked about the timeframe for receiving the approvals.
Besides requiring the assent of the UAE central bank, ENBD also needs the go-ahead from the country's finance ministry and Dubai government because of support provided to help it absorb Dubai Bank, which had to be rescued earlier in 2011 because of its excessive debt burden.
This is because a Dh2.8-billion ($762.3 million) loan given by the ministry and Dh768 million of guarantees from Dubai would be voided if Dubai Bank ceases to exist as a legal entity - as it would do when the two units are merged.
The approvals would ensure these mechanisms are retained in the combined form and not lost because of legal technicalities, the source said.
Emirates NBD declined to comment on the merger approvals but said in an earlier statement it had finalised the selection of a unified management team and an executive committee which would manage both banks.
The move comes following Emirates NBD’s recent announcement appointing Jamal Bin Ghalaita as the CEO of Dubai Bank in addition to his position as CEO of Emirates Islamic Bank.
Bin Ghalaita said: 'This important milestone aims at unifying the management team at EIB and Dubai Bank. This is a step forward towards further enhancing our customer service for the two banks.'
Sourcing citing media reports said Abdullah Showaiter will be heading the corporate and investment banking, while Faisal Aqil will lead retail banking and private banking.
The merger of the two units, approved by an internal committee on Sunday, would produce licensing cost savings of around Dh350 million, the Arabic daily Al Khaleej reported.
ENBD, which has been grappling with impairments linked to Dubai government-related entities, plans to lay off up to 15 per cent of its 8,000-strong workforce.
Commenting on the move, Bin Ghalaita said, 'Both the banks provide a comprehensive range of Shari’a-compliant products and services that cater to needs of retail, SME, corporate and investment banking clients, including transaction, deposit accounts, personal finance, capital market trade finance and corporate finance.'-Reuters and TradeArabia News Service