Dubai Islamic Bank's (DIB) earnings are in focus after Emirates NBD, its larger rival, posted sharply decreased profits for the quarter.
But while Emirates NBD took precautionary measures to insulate against turbulence from the euro-zone debt crisis and provide for its exposure to Dubai Holding, DIB has more severe troubles to worry investors.
"DIB has got other issues that we're looking at," said Mahin Dissanayake, a financial analyst at Fitch Ratings. "They do have an exposure to Dubai government-related entities, but I suspect provisions will come from retail [lending] and commercial real estate."
Fitch assigns an "A" credit rating with a "stable" outlook to DIBbecause of strong anticipated government support.
Including Tamweel, the Islamic mortgage lender, property exposure accounts for almost half of DIB's loan book, Mr Dissanayake said.
That means a sharp downturn in the global economy will bring bad news for DIB. External headwinds on world markets are likely to "keep the real estate sector in the doldrums", according to a recent report from Bank of America Merrill Lynch.
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The bank's share price has fallen 10.5 per cent since the start of the year to Dh1.95, outperforming Dubai's index during the period. But equity analysts believe that further dangers could be lurking. DIB may be affected by "very substantial hidden losses", largely tied to its stake in Tamweel, Jaap Meijer, a financial analyst at AlembicHC, said in a research report.
"DIB has revalued its subsidiary Tamweel above Tamweel's own book value, which has increased DIB's book value Dh276 million," he said. "If we used Tamweel's market valuation, the discrepancy would be even larger."
Mr Meijer said the bank's exposure to commercial property gave rise to "substantial asset quality concerns".
Not only that, the bank's profitability lags its sector, he said.
The bank, the UAE's biggest Islamic lender, is expected to report earnings on Thursday.
ghunter@thenational.ae
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Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
Analysis
Maros Sefcovic is juggling multiple international trade agreement files, but his message was clear when he spoke to The National on Wednesday.
The EU-UAE bilateral trade deal will be finalised soon, he said. It is in everyone’s interests to do so. Both sides want to move quickly and are in alignment. He said the UAE is a very important partner for the EU. It’s full speed ahead - and with some lofty ambitions - on the road to a free trade agreement.
We also talked about US-EU tariffs. He answered that both sides need to talk more and more often, but he is prepared to defend Europe's position and said diplomacy should be a guiding principle through the current moment.
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UAE currency: the story behind the money in your pockets
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The more serious side of specialty coffee
While the taste of beans and freshness of roast is paramount to the specialty coffee scene, so is sustainability and workers’ rights.
The bulk of genuine specialty coffee companies aim to improve on these elements in every stage of production via direct relationships with farmers. For instance, Mokha 1450 on Al Wasl Road strives to work predominantly with women-owned and -operated coffee organisations, including female farmers in the Sabree mountains of Yemen.
Because, as the boutique’s owner, Garfield Kerr, points out: “women represent over 90 per cent of the coffee value chain, but are woefully underrepresented in less than 10 per cent of ownership and management throughout the global coffee industry.”
One of the UAE’s largest suppliers of green (meaning not-yet-roasted) beans, Raw Coffee, is a founding member of the Partnership of Gender Equity, which aims to empower female coffee farmers and harvesters.
Also, globally, many companies have found the perfect way to recycle old coffee grounds: they create the perfect fertile soil in which to grow mushrooms.
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Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
