Tamweel rolls back into profit

Tamweel sees its recent run of profits sustained during a quarter that saw the mortgage lender return to trading on the Dubai Financial Market.

Tamweel reported net income of Dh27.7 million (US$7.5m) for the second quarter, Jaime Puebla / The National

Tamweel reported a fivefold increase in profits after returning to the Islamic home loan business following a 30-month absence from the stock market.

The lender reported net income of Dh27.7 million (US$7.5m) for the second quarter, its best quarterly result since the decline of the Dubai property market in the third quarter of 2008.

Tamweel's improved profits follow its return to issuing new mortgages last year, said Abdulla Ali Al Hamli, the company's chairman.

"Having returned to profit in 2010, Tamweel has maintained momentum by reporting strong profits for the first two quarters of 2011," he said.

"As the UAE real estate sector continues to strengthen, Tamweel remains well positioned to meet the increased demand for home finance solutions in the country."

Despite the positive bottom line, the increased profits came as the bank's underlying operating income dipped by 9.3 per cent.

Tamweel and the rival mortgage lender Amlak were the two largest Islamic home loan companies during Dubai's six-year property boom. But the decline in property prices in the autumn of 2008 exposed the weakness in their funding models, which relied on raising short-term debt to finance the long-term mortgage commitments of their customers.

The growth in new lending was almost flat, rising 0.7 per cent to Dh9.16bn during the quarter.

"Net interest income developed slightly better than expected, due to lower funding costs as Tamweel reduced its finance obligations marginally," wrote Jaap Meijer, a financial analyst at AlembicHC in a note. "But fee income was disappointing."

During the quarter, Tamweel's stock returned to trading on the Dubai Financial Market.

The stocks were effectively frozen at the beginning of the global financial crisis after the company lost access to sources of wholesale funding, and a planned merger with Amlak Finance never materialised.

Tamweel was fully acquired in November last year by Dubai Islamic Bank in a deal worth Dh374.7m. Tamweel's stock resumed trading on the Dubai Financial Market in May.

The company recently indicated it would extend financing to international buyers of properties, traditionally perceived as riskier lending.

"Our focus since re-entering the market has been on booking a high-quality portfolio of select customers and properties while introducing innovative home finance solutions," said Varun Sood, the acting chief executive of Tamweel.