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Amlak Finance Swings to Loss on Loan Loss Provisions

DUBAI — Amlak Finance, one of two cash-strapped UAE mortgage lenders to have its shares blocked from trading, declared a Dh67.1 million loss for the second quarter, due mainly to provisions it took against dud loans amid the continuing decline in Dubai’s property sector.

Amlak posted a net profit of Dh145 million for the same quarter last year, but it ran into severe financial difficulties after the emirate’s property bubble burst in the second half of 2008.

The federal government is now restructuring both Amlak and a rival lender Tamweel. The government took control of the companies, stopped them from making new loans and in November suspended trading in their shares. A planned merger between them is still under review by a government committee, which is trying to organize their ultimate consolidation with two state-controlled banks.

Amlak and Tamweel combined owe more than $1.5 billion in debts.

“The loss in (the second quarter) was inevitable, as Amlak had to make higher general provisions for the financing portfolio,” Amlak Vice-Chairman Ali Ibrahim Mohammed said on Sunday in a statement. Amlak had no income from its real estate investments during the quarter, compared with Dh104 million in 2008.

However, the company said its revenue from retail mortgages grew slightly during the first half of the year to Dh385 million compared with Dh376 million in 2008. Amlak credited a 16 per cent growth in its property financing book.

At the end of June, the company’s total assets stood at Dh15 billion, up from Dh14.2 billion a year ago, while the value of its financing portfolio rose to Dh9.5 billion from Dh8.2 billion.

“As the market is showing gradual signs of revival, we have been prudent with our provisioning and taken solid steps to optimise our strategy on operational costs and liquidity management,” Mohammed said. “We also anticipate the federal government to announce their decision on the restructure of the company, which will then add further stimulus to our business operations.

“Although new financing is likely to remain tight over the next few months, we are adamant on service quality and support to our existing customers and stakeholders,” he said.

Amlak Chief Executive Officer Arif Alharmi added that this year so far has been “a period where we have focused on maintaining the quality of our mortgage portfolio, innovative liquidity management and revisiting our long term business model to be better equipped to meet our customers’ as well as all stakeholders’ needs in the future.”

Tamweel posted a second-quarter loss of Dh35 million on August 14, as it too set aside higher provisions for loan losses due to sagging property prices. Tamweel said that its provisions for losses in the second quarter amounted to Dh89 million, up from Dh6.24 million a year ago.

· abdulbasit@khaleejtimes.com