UPDATE 2-Emaar profit seen hit by Dubai Bank write-off
* Emaar's 30 pct stake in Dubai Bank worth 172 mln dirhams
* Dubai government said on Monday it took over Dubai Bank
* Write-off to hit second-quarter profits, says analysts
* Emaar shares fall 0.9 percent
(Recasts, adds share price, analyst comments)
By Shaheen Pasha and Praveen Menon
DUBAI, May 19 (Reuters) - Emaar Properties EMAR.DU said it will write off its investment in Dubai Bank, valued at about 172 million dirhams ($46.8 million), a move expected to further erode the company's profits in the short-term, analysts said.
The decision comes after the Dubai government announced on Monday that it would take over the troubled Islamic lender, thereby completely diluting the holdings of Dubai Bank's current shareholders.
"We view this clean-up act as positive although pressuring the second-quarter bottom line and share price performance in the near term," said a note from CAPM Investment.
Emaar, UAE's largest developer by market value, held a 30 percent minority stake in Dubai Bank, which is about 0.3 percent of Emaar's total assets and about 0.56 percent of its total equity.
Dubai Bank is wholly-owned by Dubai Banking Group which itself is 70 percent-owned by Dubai Holding.
"The value of this investment will be written off during second quarter of 2011," Emaar said in the statement.
The builder of the world's tallest tower had a rough start to the year with a 45 percent slump in its first-quarter results, as revenue from its apartment sales declined by over 80 percent.
Shares of Emaar fell 0.94 percent on the Dubai bourse .DFMGI at 0724 GMT.
"In the wider scheme of things, it may not be that significant....but it will affect the second quarter results," said Chet Riley, Nomura property analyst.
The move will however, ensure that the developer returns to its core business, as it had very little control in the indebted bank's operations, he said.
"It also means that going forward, as a shareholder, it would not have to inject any capital into the bank. This will be taken positively," said Riley.
The developer is in the process of conducting a strategic review of its foreign operations, which may lead to a greater focus on its hospitality and retail resort business, sources told Reuters. [ID:nLDE744198]
Emaar declined to comment.
Dubai, which is struggling to emerge from a debt crisis, said it will inject an unspecified amount of capital into the bank and its takeover would protect depositors' interests. [ID:nLDE74F0LN] ($1=3.672 Uae Dirham) (Editing by Hans Peters)
- Moscow fights back after sanctions; battle rages near Ukraine crash site
- Carnage at U.N. school as Israel pounds Gaza Strip |
- U.S. economy bounces back in second quarter |
- EU and U.S. announce new sanctions on Russia over Ukraine |
- Obama says strains over Ukraine not leading to new Cold War with Russia