Emirates NBD sold a 10.5 per cent stake in Network International, the payments processing business which floated on the London Stock Exchange in April this year, raking in £304.9 million (Dh1.38 billion) in proceeds.
Dubai's biggest lender revealed the sale to institutional investors in a statement to the Dubai Financial Market on Thursday, saying it had sold 52.6 million shares at a price of 580 pence per share. Following the sale, it retains 59.7 million shares, or 11.9 per cent and said in a statement that it "maintains a key relationship with Network International for its cards business".
Emirates NBD's shares gained 1.5 per cent in trading on Thursday, following steep increases in value earlier in the week after the bank revealed plans to increase its foreign ownership limit to 40 per cent, up from 5 per cent currently. That sent the bank's shares rocketing to a 12-year high. It has increased in value by 56 per cent over the past 12 months.
In a note on the stake sale, the head of research at Dubai-based Arqaam Capital, Jaap Meijer, said he expected the lender would declare a gain of about Dh1.1bn on the sale, and that the remaining stake would be marked to market, which would create a further gain of about Dh1bn in value. The bank had already made Dh2.1 billion through stake sales conducted as a result of Network International's IPO.
The boost to Emirates NBD's balance sheet will be a boon to the lender. However, Mr Meijer still expects the bank will need to make adjustments to its capital base following its recent acquisition of Turkey's Denizbank. He anticipates the bank will launch a rights issue to raise about $2bn (Dh7.35bn) to boost capital adequacy ratios to cover its enlarged loan book. Alternatively, the bank could grow capital by continuing to make low levels of dividend payments to shareholders and use retained earnings to grow equity organically.
Analysts from Egyptian investment bank EFG Hermes also expect Emirates NBD to conduct a rights issue, but say they expect this to be "pared down" following the Network International stake sale.
"We believe, in light of this potential sale and existing strong capital buffer (640 basis points above minimum as of Q2 2019), Emirates NBD’s rights issue will end up being lower than $2bn," analysts Shabbir Malik and Rajae Aadel said in a note. "We do not think Emirates NBD will shelve the rights issue altogether as the impact from the Denizbank acquisition is likely to be material."
