Bloomberg News

Emirates NBD Will Pay for Dubai Bank in Cash, EFG-Hermes Says

October 12, 2011

Oct. 12 (Bloomberg) -- Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, will pay for the acquisition of state-owned Dubai Bank in cash, EFG-Hermes Holding SAE said.

The takeover will lower Emirates NBD’s total capital adequacy ratio by 100 basis points, or 1 percentage point, analysts Murad Ansari and Shabbir Malik said in a report, citing guidance provided by management in a conference call yesterday. With Tier 1 capital of 13.4 percent and a total capital adequacy ratio of 21.2 percent at the end of June, “Emirates NBD has the capacity to absorb Dubai Bank,” the investment bank said.

In the worst case scenario, the acquisition could reduce Emirates NBD’s Tier 1 capital ratio by 263 basis points and the total capital adequacy ratio by 307 basis points, “which though lower are still healthy,” according to the report.

A spokesman for Emirates NBD, who declined to be identified because of company policy, confirmed the bank made the statements.

The Dubai government, which owns 56 percent of Emirates NBD, said yesterday the lender will take over Dubai Bank PJSC as part of a plan to enhance the emirate’s banking industry. Dubai Bank, which was 70 percent owned by Dubai Holding LLC and 30 percent by Emaar Properties PJSC, was nationalized in May after loan losses increased.

Dubai Bank will be a stand-alone subsidiary of Emirates NBD and not be merged with Emirates Islamic Bank PJSC, the bank’s other Islamic unit.

--Editors: Steve Bailey, Keith Campbell

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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