Profits dip at Sharia mortgage lender Tamweel amid legal battles
Legal battles restrained earnings at Tamweel, which posted a sharp dip in full-year profits despite a substantial rally in Dubai property values.
The Sharia mortgage lender, in which Dubai Islamic Bank is a majority shareholder, reported net profit for the full year of Dh72.4 million (US$19.7m), a 28.8 per cent decline compared with 2011.
"Net profit was lower in the current year due to exceptional provisions relating to certain ongoing litigations for which the company made full provision while continuing to fight its rights," said Tamweel.
The company did not give details of its legal battles.
However, Abdulla Ali Al Hamli, Tamweel's chairman, said the company was well placed to benefit from Dubai's property recovery.
"As the company moves forward, we are uniquely positioned to play a full and active role in supporting the home finance needs of people looking to purchase property in the UAE," he said.
Rental rates in Dubai increased 16 per cent during last year as the local economy recovered, according to data from the property analyst CBRE.
But Tamweel did not register an increase in margins on lending. The company's income from Islamic financing and investing assets fell by 1.1 per cent to Dh552.3m despite growth of its total assets.
Dubai Islamic Bank said this month it would seek a full takeover of the mortgage lender, having earlier rescued the company after the global financial crisis laid bare the flaws in Tamweel's business model, which relied on it being able to access cheap funding from bond and sukuk markets.
When financial markets dropped in 2008, Tamweel shares were frozen for almost three years as the Government sought, and then abandoned a mooted merger with Amlak Finance, still in the midst of restructuring talks.
In the meantime, mortgage sales are said to have dwindled across the financial services industry during the first weeks of this year as a result of a Central Bank circular imposing minimum loan-to-value ratios on lenders. It is unclear whether the directive will be applied in its current form.
Tamweel shares gained 0.9 per cent to Dh1.13 yesterday.
Published: January 22, 2013 04:00 AM