Three possible options open for Amlak

Islamic lender Amlak, whose long-touted plan to merge with rival Tamweel has been scuppered, will need new options to resume lending and to trade as a listed company.

On Sunday, Dubai Islamic Bank raised its stake in Tamweel  to 57.33 per cent, effectively ending the prospect of an Amlak-Tamweel tie-up.

The two firms have not traded since November 2008 when the United Arab Emirates government stepped in to restructure them.

Some of the possible scenarios for Amlak are as follows:

Bank takeover

This is the most likely scenario although any bank that would look to take on Amlak would have to be cautious about the quality of Amlak's real estate investments, analysts said.

"For Emirates Islamic Bank to take on Amlak would make the most sense," said one Gulf-based banker who declined to be named, noting EIB was an Islamic bank big enough to absorb Amlak.

EIB is an affiliate of Emirates NBD, the Gulf's largest bank by assets.

"Dubai Islamic Bank is weaker after Tamweel and I'm not sure they would want Amlak as well," he added.

Zahed Chowdhury, an institutional equity sales executive at Al Mal Capital in Dubai, did not rule out Dubai Islamic Bank's buying Amlak if Amlak was offered cheaply enough.

"Dubai Islamic Bank would be buying in a sector that a lot of people think is troughing," he said. "There is also the thought that if you buy into one (Tamweel) and not the other (Amlak), then you haven't settled the mortgage market and you would still be leaving a languishing entity and that is Amlak."

The government gave the final nod to Dubai Islamic Bank to increase its shareholding in Tamweel from 20 per cent as it looks to kickstart lending in Dubai's battered property market.

Shareholder increase

Dubai's Emaar Properties, which owns 45 per cent of Amlak, could increase its holding through a capital increase, but Emaar is not a bank and therefore it would not solve the company's problem of finding recurring funding sources.

"We probably wouldn't consider it favourable if Emaar were to consider taking over the financial assets of Amlak...but we still think it is unlikely that a financial transaction similar to Dubai Islamic Bank and Tamweel would occur," added Chet Riley, analayst at Nomura Bank.

"Emaar could possibly decide to assume control of Amlak's distressed portfolio, which strategically makes more sense to us."

Direct government support

Dubai's government may not help Amlak and any assistance would just be to offset losses, analysts said.

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