EMIRATES NBD, the largest bank in the United Arab Emirates by assets, will take over struggling government-controlled Islamic lender Dubai Bank under orders from Dubai’s ruler, as consolidation gets under way in local banking.
Dubai’s government, which also holds a 55.6 per cent stake in Emirates NBD, has been working to support state-linked institutions saddled with debt since the burst of the global asset bubble hit the Gulf emirate two years ago.
“[The] Dubai Government is keen to take the necessary steps to empower financial institutions to fully operate in a way that serves the national economy and consolidate the country’s position as a first class international financial hub,” the government’s media office said in a statement.
Emirates NBD shares gave up early gains to drop as much as 1.6 per cent to a two-month low after the news, on worries the bank may need to inherit the problem assets of the Islamic lender. Dubai Bank had been under scrutiny well before Europe’s latest wave of sovereign and banking debt troubles flared up again this year.