Government pockets Dubai Bank
The Dubai government last month took full control of Dubai Bank, an Islamic lender that was 70 percent owned by the emirate’s Dubai Holding and 30 percent owned by real estate developer Emaar Properties. The bank’s latest annual report showed a loss of $79 million in 2009 after nearly tripling its impairment losses to $148 million from exposure to Dubai Holding and the real estate sector. “The intervention is designed to ensure that Dubai Bank’s business continues uninterrupted while options for the bank’s future, whether to be run on a stand-alone basis or potentially merged with another bank in which the government has ownership, are being assessed,” a Dubai government statement said. The government’s plans for the bank, which include a capital injection that will effectively dilute both shareholders, dispelled fears among investors nervous about a potential bank failure and sent positive shockwaves across markets. According to industry sources, the bank may need “a couple hundreds of millions of dollars” to clean up the balance sheet before potentially being sold to a large bank with government stakes, with Emirates NBD pitted as a leading potential buyer.
Palestine’s first corporate bond
Last month the investment firm Palestinian Development and Investment Company (PADICO) became the first Palestinian company to successfully raise capital through the issuance of corporate bonds. The five-year bonds, estimated at $70 million, have already been oversubscribed after receiving orders from investors amounting to $90 million. The bonds will have an annual fixed interest rate of 5 percent for the first 30 months, and a variable interest linked to the United States dollar London Interbank Offered Rate afterwards, within a range of 5 to 6.5 percent. The proceeds of the transaction will be used for a new $300 million power plant, as well as for a tourism center near Jericho in the West Bank, where PADICO operates and is currently headquartered. According to statements by Palestinian Prime Minister Salam Fayyad, the Palestinian Authority (PA) plans to sell bonds itself, after encouraging private companies to do so. The PA might be issuing bonds sooner than expected, as Israel suspended its transfer of tax revenues to the authority in early May, following the reconciliation agreement between the Palestinian factions Fatah and Hamas.
Lebanon’s golden reserves
Lebanon ranks 18th worldwide and 2nd in the Middle East and North Africa region in terms of the value of its gold reserves, according to the latest report published by the World Gold Council (WGC). Lebanon’s total gold reserves stood at 286.8 tons, some 29 percent of the central bank’s total reserves. The country came in second in the MENA region after Saudi Arabia, which ranked 16th worldwide, with gold reserves of 322.9 tons, though accounting for only 3 percent of its total reserves. Worldwide, the United States topped the list with official gold holdings of 8,133 tons, followed by Germany, the International Monetary Fund, Italy and France. The report mentioned that gold sustained its upturn during the first quarter of 2011 but at a slower pace of 2.4 percent quarterly rise, compared to an average quarterly increase of 6.2 percent over the past two years. According to the WGC’s report, the demand for gold and silver has been fueled by investors’ concerns about inflation in the US after the Federal Reserve’s decision to maintain low interest rate levels, as well as the high inflationary environment in China and India, political turmoil in the Middle East and the effects of Japan’s earthquake.
Lebanese bankers talk Basel III
In a recent conference at the Ecole Superieure des Affaires (ESA), titled “Basel III — Immunity requirements”, Riad Salameh, governor of Banque du Liban, Lebanon’s central bank, stated that the Lebanese banking sector is prepared to implement the Basel III pillars and is adopting the appropriate measures. The latest upgrades to the Basel accords include measures to limit counter-party credit risk, to tighten definitions of common equity and to introduce a leverage ratio, in an attempt to restore investors’ confidence in the global financial sector, Salameh said. Talking about the banking sector’s solvency ratio — or its ability to meet long-term obligation — which currently stands at around 7 percent, Salameh stressed the need to raise the ratio to about 10 percent within the next four years to meet Basel III standards. He also said that the central bank intends to increase the banking sector’s provisioning ratio to 2 percent, urging Lebanese banks to limit their dividend distribution to 25 percent of their net profits. Meanwhile, Joseph Torbey, president of the Association of Banks in Lebanon, said that the importance of the latest Basel accords lies in their ability to shield banks from shocks and to lead to further coordination between Lebanon’s banking sector and surveillance authorities.
US, EU freeze Assad’s assets
Following an intense crackdown on anti-government protesters in Syria, the Obama administration froze the assets of Syrian President Bashar al-Assad and six other officials, including Vice President Faruq al-Shara, Prime Minister Adel Safar, Interior Minister Mohamad Ibrahim al-Shaar and Defense Minister Ali Habib Mahmud. In a statement made on May 18, the Treasury Department announced that it would freeze any property, or interests in property, in the United States which belongs to Assad and the other targeted Syrian officials, while also strongly condemning the Syrian government’s use of violence against its people. On May 23, the European Union followed suit, agreeing to impose sanctions on Assad and approximately “a dozen other senior members of the government”, according to British daily the Guardian. Meanwhile, Switzerland also announced on May 19 sanctions on 13 Syrian officials, including implementing a travel ban and freezing any assets the officials have in Swiss banks. Switzerland had already blocked assets of Libya’s Muammar al-Qadhafi and his entourage, as well as those of ousted Tunisian and Egyptian leaders.
Raw ratings for Tunisia’s largest bank
Capital Intelligence (CI), an international credit agency, assigned a negative outlook to the financial strength and foreign currency ratings of Société Tunisienne de Banque (STB), Tunisia’s largest bank with $4.8 billion in assets, citing political uncertainty and the bank’s poor asset quality and insufficient capital. The credit agency said that profitability has shown some signs of improvement at the majority government-owned bank, but risk of increased provisioning charges continues to impact net profit. “STB’s profitability, as is the case with the Tunisian banking sector, could come under pressure in 2011 on the back of possible asset quality deterioration and limited asset expansion. STB’s position may be more vulnerable due to its market position and government ownership,” said CI.
Aid rolls in for Egypt
Promises of financial assistance poured in for Egypt in May with Saudi Arabia pledging $4 billion in grants, long-term loans, and deposits, Egypt’s MENA news agency quoted Field Marshal Hussein Tantawi, the country’s current ruler as saying. In a televised speech, US president Barrack Obama also pledged $1 billion in debt relief to support Egypt’s transition to democracy, and guaranteed another $1 billion loan for new projects and job creation. Egypt was quick to accept the loan guarantee and said it plans to raise the money through a 5-year Eurobond offering this year. In addition, the country is nearing an agreement with the World Bank for a $2.2 billion soft loan and has requested up to $12 billion from the International Monetary Fund to support the country’s ambitious $38 billion development plan.
