Amlak and Tamweel merger 'months away'

The country's largest and second-largest mortgage lenders are in talks to merge early next year.

DUBAI // The Dubai-based property financiers Amlak Finance and Tamweel are "still months away" from sending a formal request to the Central Bank for approval of their proposed merger, a senior Amlak executive has said. Arif al Harmi, the chief executive of Amlak Finance, said the firms were negotiating terms of a possible merger, but had not yet sought formal approval."There is a long procedure ahead and we are yet to present the merger terms to an extraordinary general meeting for approval," Mr Harmi said, adding that its date was yet to be confirmed.

Amlak and Tamweel, the country's largest and second-largest mortgage lenders, are in Government-brokered talks aimed at a merger before the end of the first quarter of next year. The merged entity would create the largest home financier in the region with a combined balance sheet estimated at more than Dh27 billion (US$7.35bn). "I don't think we will be able to move on an application [to the Central Bank] at least for a couple of months," Mr Harmi said.

In the meantime, he said Amlak was negotiating with Tamweel, the Government, stakeholders and the Central Bank on how to continue business as usual. Asked if there was a proposal under consideration to roll Tamweel's and Amlak's banking licence applications into one to allow easier access to funds, he said it was too early to say if the merged entity would have a banking licence. "We have renewed our application for banking licences in May this year and are yet to hear anything from the regulator," he said.

However, the new entity would be "better placed" in the market with a banking licence, he added. Financial institutions in the region are under increasing pressure from the effects of the global financial crisis, with many cutting back on the amount they are willing to lend home owners. Home financing, a relatively new sector to the country, has grown rapidly in the past few years. According to estimates, the market is worth about Dh60bn.

Some analysts have predicted a decline in growth for the mortgage market as tight liquidity makes it harder for financial institutions such as Tamweel and Amlak to operate due to their reliance on the credit markets for funds and investment. The two have the lion's share of the country's mortgage market, followed by commercial banks including Emirates NBD, Abu Dhabi Commercial Bank and international players such as HSBC.

With a banking licence, the merged entity would be able to take deposits, which is considered the cheapest way of getting liquidity. The merger talks are taking place at a time when the country's property market has slowed to a near standstill and there have been falls in the prices of some properties. Mr Harmi said the property market fundamentals were strong and the government had taken "all the necessary steps" to ensure liquidity and buoyancy in the sector.

"We believe the property market is still healthy despite current negative sentiment," he said, adding that the escrow and mortgage laws and Central Bank measures regarding liquidity would restore "market confidence". [e-mail]