UPDATE 2-Dubai bank ENBD to start repaying govt support cash

Thu Jan 31, 2013 11:22am EST

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By David French

DUBAI, Jan 31 (Reuters) - Emirates NBD, Dubai's biggest bank, said it will start repaying part of the 12.6 billion dirhams it received from the government in 2008, after reporting forecasting-beating quarterly results.

The United Arab Emirates' Ministry of Finance placed 70 billion dirhams ($19.1 billion) with banks to shore up their balance sheets in the wake of the global financial crisis.

The method of support, in the form of capital-boosting bonds sold to the government, are losing their value as they head towards maturity, meaning it's in the interest of the bank to replace them with cash raised in current favourable conditions instead of waiting and having to act more drastically later.

"We will have to do something about it at some point because no bank wants to fall off a capital cliff down the line," Surya Subramanian, ENBD's chief financial officer, told a media call.

While ENBD has yet to repay any of the cash it received, other banks in the UAE have started addressing the bonds, which boost Tier 2, or supplementary, capital.

National Bank of Abu Dhabi, the UAE's largest bank by market value, said on Tuesday it had 3 billion dirhams outstanding at the end of 2012, having repaid 2.6 billion dirhams in the second half of last year.

ENBD Chief Executive Rick Pudner said the bank was still awaiting regulatory approvals for its $500 million purchase of BNP Paribas' Egyptian assets and he expected the deal to be completed at the end of the first quarter or beginning of the second.

IMPROVING PROFITS

ENBD on Thursday posted a fourth-quarter net profit more than triple the same period of 2011 on the back of lower impairments and increased non interest income.

The lender, 55.6 percent owned by state fund Investment Corp of Dubai, made 625 million dirhams in the three months to December 31, a statement from the bank said, compared with 152 million dirhams in the same period of 2011.

The result beat the average forecast of five analysts polled by Reuters, who expected 484 million dirhams.

Full-year profit for 2012 also rose, reaching 2.55 billion dirhams against 2.48 billion dirhams in 2011.

The lender has been heavily hit by impairment allowances in recent quarters - particularly in the latter half of 2011 and the first six months of 2012 - but provisions for the final three months of 2012 period were down 11 percent year-on-year.

State-linked entities have done much of the damage and ENBD has increased its provision coverage for Dubai Group, one of the last restructurings still outstanding, to 54 percent of its 4.6 billion dirhams exposure from 34 percent at September-end.

Bankers said at the beginning of January that Dubai Group had agreed a deal with four dissenting creditors who had begun unprecedented legal action against the firm, paving the way for a $10 billion restructuring.

However, as improvements are seen in sectors of the local economy, the bank was benefiting from writebacks on loans previously classed as impaired, including the repayment of a 1 billion dirhams loan from one unnamed corporate, Ben Franz-Marwick, head of investor relations, said.

Loan growth was forecast for 5 percent in 2013, Pudner said, after a 7 percent increase last year. ($1=3.6730 UAE dirhams) (Additional reporting by Mirna Sleiman; Editing by Dinesh Nair and Mike Nesbit)

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