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Tamweel Posts Q2 Loss of Dh35m on Higher Provisions for Losses

Tamweel said its provisions for losses amounted to Dh89 million, nearly 13 times higher compared to its impairment charges a year ago at Dh6.24 million. In the first half, total provisons reached Dh168 million.

The company had an operating profit of Dh54 million before provisions were taken out.

“In light of the adverse market conditions, tight liquidity and falling real estate market, Tamweel has taken provisions for potential delinquencies on its asset book and to offset the decline in market value of its property investments,” the company said in a disclosure to the Dubai bourse.

Tamweel said the negative impact of the global economic slump continued to affect the company in the second quarter. The worldwide recession has drastically curbed the dramatic rise over the years, of UAE’s property sector. Property prices have plunged from their peak levels in the second half of 2008. Deutsche Bank said last June it expected property prices to take another 20 per cent dive for the remainder of the year.

Shares in Tamweel and another troubled mortgage provider Amlak Finance, have been suspended from trading by the Dubai stock exchange since late November when the government decided to merge the two companies. Their merger is still under review by a federal government committee which is threshing out the final structure of Amlak and Tamweel’s consolidation with two state-controlled banks.

Shares of Tamweel was last traded at Dh0.99, while Amlak was at Dh1.02. Last week, ratings agency Moody’s downgraded the issuer rating of Tamweel, citing the firm’s falling asset quality, a slow state support process and higher funding costs.

The downgrade to Baa1 from A3 was driven partly by “the deterioration of Tamweel’s standalone financial profile in the wake of materially higher funding costs, heightened provision charges and frozen asset growth, with very limited capacity to absorb increasing charges with higher volumes,”Moody’s said.

Moody’s also cited “high dependence on concentrated wholesale bank funding amplifying liquidity risks, and forcing indirect government support .. (and) a very slow merger and support process from the authorities, with delays placing Tamweel in a difficult operating position, which in turn contributes to a weakening of its franchise value.”

Moody’s said it expected “an incremental deterioration in asset quality, which is expected to worsen in the next few months, in the wake of an expected increase in job losses and lower values of off-plan properties - primarily in Dubai.” 


rocel@khaleejtimes.com