Emirates NBD shares surge on plan to raise foreign ownership

Dubai's biggest bank also plans to raise up to Dh7.35bn in capital

UAE's non-oil private sector growth slows down in July, Emirates NBD PMI Index shows. Chris Whiteoak / The National

Shares of Emirates NBD, Dubai's biggest bank by assets, jumped 13.6 per cent after the lender proposed to increase its foreign ownership limits and raise around Dh7 billion of capital, amid reports it is close to acquiring Turkish lender Denizbank from Russia’s Sberbank.

Emirates NBD said it would propose to shareholders at a March 27 general meeting that the foreign ownership limit of the bank be raised to 20 per cent from its current level of 5 per cent.

The bank’s shares yesterday closed at Dh10, their highest level since August 2015.

“We think the planned capital increase will be contingent on the acquisition of Denizbank,” said Jaap Meijer, head of research at the Dubai-based investment bank Arqaam Capital. “We believe the foreign ownership limit will be raised irrespectively of the planned acquisition and share issue.”

Mr Meijer said there was still value in Emirates NBD shares even after Sunday’s close, and that the bank’s valuation had hitherto been held back by restrictions on foreign ownership of its stocks.

"The participation or contribution of nationals of the United Arab Emirates at any time during the existence of the company shall not be less than 80 per cent of the share capital of the company, " the bank said in a regulatory filing with the Dubai Financial Market. "The expression 'nationals' shall include natural persons as well as firm partnerships and bodies corporate which are owned by nationals of the United Arab Emirates."

Any approval of the amendment of ownership restrictions by shareholders would need to be given the blessing of regulatory authorities, the bank said.

Emirates NBD will also invite shareholders to approve raising its capital by up to Dh7.35 billion through the sale of new shares for a subscription price that will be no less than a 10 per cent discount to the market price of the company's stock at the time of sale.

Investment Corporation of Dubai, the emirate’s sovereign wealth fund, owns 55.8 per cent of the bank, Capital Assets owns 5.3 per cent, other institutional investors hold 16.1 per cent while individuals have 22.8 per cent, according to an investor presentation on the bank's website posted in February.

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Emirates NBD’s capital raising plans come amid plans to expand internationally; the bank is preparing to submit a bid for Sberbank’s wholly owned Turkish unit in March, people with knowledge of the matter told Bloomberg News last month.

A deal for Moscow-based Sberbank’s 99.9 per cent holding could be valued at about $3.69 billion, according to Bloomberg calculations.

Emirates NBD's vice chairman and managing director Hesham Al Qassim said in January the bank planned to open a representative office in Turkey in 2018 "to better support our customer network".

The bank plans to expand its network in Egypt and Saudi Arabia as part of its international growth plans for the year.

Emirates NBD said in January that its net income rose 17 per cent year-on-year in the fourth quarter, broadly in line with analysts' estimates, as its interest income benefitted from December interest rate hikes.

Net profit at the bank rose to Dh2.176 billion in the three months ended December, compared to Dh1.857bn in the same period in 2016.

Profit for the quarter came in ahead of a prediction of Dh1.98bn reported by Reuters, but slightly below forecasts by Bahrain-based Sico (Dh2.23bn) and NBAD Securities (Dh2.24bn).