Azernews.Az

By Bloomberg

Dubai increased borrowings from Emirates NBD PJSC this year, pushing the United Arab Emirates’ second-biggest bank further from meeting rules that limit government lending.

Loans to the Dubai government climbed 4 percent in the first quarter to 110.9 billion dirhams ($30 billion), while the lender’s total capital rose 2 percent to 94.4 billion dirhams, according to data compiled by Bloomberg. The central bank in 2013 ordered banks to restrict lending to the government to 100 percent of their capital in a bid to reduce concentration risk, with the excess to be reduced equally over five years. Emirates NBD’s results presentation says its capital was 46 billion dirhams at the end of March.

As Dubai’s biggest bank, state-controlled Emirates NBD is the largest lender to the government, which is spending billions of dollars consolidating the emirate’s status as a tourism and aviation hub. The bank will meet regulations through a mix of growth in its capital base and a reduction in exposure, Chief Executive Officer Shayne Nelson said January 18.

“A drop in loans to the government may not be imminent,” Taher Safieddine, an analyst at Shuaa Capital PSC, said by phone from Dubai on Wednesday. Emirates NBD will “focus on increasing exposure to other sectors, retail, mid-size and large corporates, Islamic banking, plus increasing its capital base.”

Boosting Capital

Loans to the Dubai government made up 44.5 percent of the total at the end of March, compared with 38.2 percent in 2013, first quarter results showed. Overall loans rose 4 percent from a year ago to 248.9 billion dirhams.

The bank raised $1.37 billion from bond sales in the period, including 550 million euros ($589 million) from an offer of seven year notes. It also privately placed over $430 million of issues, all of which helped to boost capital.

“A lot of borrowers are now looking at capital markets, which would be a route out for both the borrower and Emirates NBD,” Sanyalaksna Manibhandu, the head of research at NBAD Securities LLC, said by phone from Abu Dhabi on Wednesday. “But it’s going to take a while and maybe there will be some arrangement made with the central bank” in the meantime.

Discussions with stakeholders on related party lending continue and Emirates NBD intends to be compliant with large exposure limits over the specified timeframe, Nelson said in January. The bank declined to comment further yesterday.

Emirates NBD reported a 60 percent jump in net income for the period to 1.67 billion dirhams, boosted by higher lending. The bank is being helped by a recovery in the tourism, retail and property industries in its home market of Dubai.

The emirate’s economy, the second-biggest of seven that make up the U.A.E., may expand as much as 5 percent in 2015, the head of the Department of Economic Development said in February, accelerating from an estimated 4 percent in 2014.