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08 December 2023

Abu Dhabi to pump Dh16bn into five banks

Ziyad Al Dabbas, Financial Consultant at NBAD (SUPPLIED)

By Nissar Hoath

The Government of Abu Dhabi yesterday announced it is to inject Dh16 billion into five local banks to increase liquidity and help protect the economy from the effects of the global economic crisis.

The government will subscribe to tier one capital notes issued by the National Bank of Abu Dhabi, which will receive Dh4bn, Abu Dhabi Commercial Bank (Dh4bn), First Gulf Bank (Dh4bn), Abu Dhabi Islamic Bank (Dh2bn) and Union National Bank (Dh2bn).

In January the government said liquidity would be made available through local banks within two months. The announcement was made by Dr Sheikh Sultan bin Khalifa Al Nahyan, a member of the Executive Council, after the inauguration of the fifth annual Abu Dhabi Real Estate and Investments Show.

Yesterday the emirate's Department of Finance said in a statement: "Following a comprehensive review of the growth strategy of the Abu Dhabi banking sector, and in view of the economic ambitions of the emirate of Abu Dhabi, the Government of Abu Dhabi, at its initiative, has decided to implement an action plan under which it will inject additional capital into the following Abu Dhabi financial institutions: Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, First Gulf Bank, National Bank of Abu Dhabi and Union National Bank.

"The government has taken the initiative of injecting tier one capital notes worth Dh16bn, which is an appropriate and proactive response to ensure that the strong confidence in Abu Dhabi's financial institutions is further enhanced given the current global economic conditions."

Hamad Al Hurr Al Suwaidi, a member of Executive Council and Undersecretary of the Abu Dhabi Department of Finance, said: "The government views this capital injection into the banking system as an important step to allow Abu Dhabi's financial institutions to remain strong and well-capitalised compared with their international peers and fulfil their role in achieving the government's vision for the Abu Dhabi economy."

The department said the government would subscribe to tier one capital notes issued by each of the financial institutions, with a total aggregate principal amount of Dh16bn.

JP Morgan acted as arranger and Clifford Chance provided legal advice. The notes will be non-voting, non-cumulative perpetual securities and will be callable subject to certain conditions.

FGB Managing Director Abdulhamid Saeed said: "We believe markets will better value banks with strong capital positions. The tier one capital injection by the government goes hand-in-hand with FGB's growth plan and complements our objective to be a well-capitalised banking entity."

Expert comments

Dr Mohammed Afifi, Director of Research at Abu Dhabi-based Al Fajr Securities, said: "The Dh16 billion injection is a positive step to support the liquidity situation in the five banks. It will push the banks to give up their reservations in granting loans, which have disrupted Abu Dhabi's economy. The banks in Abu Dhabi have stopped giving loans and the economic activity has nearly halted. Also, majority of banks registered a huge fall in their revenues during the last quarter of last year. It is important the banks take advantage of the injected money and reactivate the market in Abu Dhabi."

Ziyad Al Dabbas, Financial Consultant at NBAD, said: "The banks were in need of the money injected because Abu Dhabi has some huge projects being executed at present and they should be executed quickly. The projects should continue to get finance."

Mohammad Nasr Abdeen, Chief Executive Officer of Union National Bank, said: "I thank the wise leadership of the Abu Dhabi Government. It is a clear statement by the government of its continuing commitment to ensuring the financial institutions in the emirate remain strong and are able to support the visionary goals of His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi, and General Sheikh Mohammad bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces."
(By Abdel Hai Mohamad)