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Wednesday, 25 March 2009

Emirates NBD to Convert $3.43 Billion Deposits to Tier 2 Capital

Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, plans to convert 12.6 billion dirhams ($3.43 billion) of federal government deposits into Tier 2 capital, Chief Executive Officer Rick Pudner said.

The state-controlled bank’s capital adequacy ratio will rise to 15.6 percent, from 11.4 percent at the end of last year, after the deposits are converted into capital, Pudner told a conference today.

The lender needs to add 3.5 billion dirhams to its Tier 1 capital by the end of June, Chief Financial Officer Sanjay Uppal said earlier. The bank doesn’t plan to offer shares to raise the Tier 1 capital and it is likely to be in the form of a “perpetual debt instrument,” he said.

Saudi Stock Market Weekly Report Week Ending Wednesday, 25 March 2009

Dear AIG…

The NY Times on Wednesday featured a strongly-worded and impassioned letter sent by Jake DeSantis, an executive vice president at AIG’s financial products unit to chief executive Edward Liddy.

Here’s the 1,500 word dispatch in full:

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

Kuwaiti Central Bank Advices Companies to Issue Bonds, Not Loans

Kuwait’s central bank urged private companies to use bonds instead of loans for financing, the bank’s governor said.

“We advised the private sector not to rely almost completely on loans instead of issuing bonds,” Sheikh Salem AbdulAziz al-Sabah said at a conference in Bahrain today. “This is an opportunity for the private sector to finance through bonds which can make the financial sector much deeper.”

GCC Shouldn’t Rush to Monetary Union, Al-Jasser Says (Update1)

The Gulf Cooperation Council shouldn’t rush into forming a single currency as member states need to work out the framework for a regional central bank.

“It took the European Union 45 years” to put together a single currency, Saudi Arabia’s central bank Governor Mohammad al-Jasser said in Manama, Bahrain, today. “We should not rush.”

Gulf Arab leaders approved an agreement in December to create a central bank and a regional single currency to help boost trade among the members. The heads-of-state agreement still needs to be endorsed by the national governments of the five member states, Saudi Arabia, Kuwait, Bahrain, Qatar, and the United Arab Emirates. Within the six-nation GCC, Oman has pulled out of the process.

Saudi credit growth still healthy -cbank gov

Saudi Arabia's central bank governor said on Wednesday that credit growth in the oil-exporting kingdom remained healthy.

'There is still very healthy growth in credit,' Muhammed al-Jasser told reporters on the sidelines of a banking conference in Bahrain's capital Manama.

When asked if the kingdom planned to issue government bonds, Jasser said: 'We don't need a government bond issue.'

UAE will not cut interest rates now -cbank

All Gulf Arab economies face a possible economic contraction this year but the United Arab Emirates will definitely not cut interest rates immediately, the UAE central bank governor said on Wednesday.

Sultan Nasser al-Suweidi told reporters that the UAE was looking at how to bridge loan-to-deposit ratios. He said that banks' capital adequacy ratios would be raised to 11 percent by June 30.

'A contraction is a possibility in all GCC countries,' he said. 'It is still on the drawing board with the UAE finance ministry to help bridge a gap between loans and deposit ratios.

Questions Still Surround Dubai World Lawsuit

The economy has taken a big toll on Las Vegas, with plummeting home sales and values, a decline in visitors, and layoffs and project delays. Now a lawsuit's been filed over the massive CityCenter project that is supposed to help the city rebound from the recession.

MGM Mirage says the lawsuit filed Monday by a subsidiary of Dubai World is "completely without merit."

The company released a statement Tuesday morning that says, "Dubai World is well aware of our written commitment to meet our funding obligations and that MGM Mirage has available cash to satisfy those obligations.

EIB loans and facilities up by 7.6% in 2008 to Dh448m

The Emirates Industrial Bank (EIB) offered loans and financial facilities worth Dh448m in 2008, according to the bank's annual report.

In 2007, the report said, the bank funded 49 projects worth Dh540m.

"Loans and other facilities grew by 7.6 per cent in 2008 to Dh448m from Dh416m in 2007," revealed the report which was discussed at the ordinary general assembly of the bank today. Figures showed that the bank has financed 613 out of 837 projects in the tune of Dh4.6 billion since its inception up to the end of 2008.

Nakheel delays $3bn mall work

Nakheel said its retail unit had delayed by 12 months its $3 billion (Dh11bn) mall expansion plans.

"Design work and site preparation for Nakheel Retails expansion plans has been delayed for 12 months," it said yesterday.

"We have the responsibility to adjust our short-term business plans to accommodate the current global environment; our short-term business model is aligned to meet market demand," it said.

Region’s airlines face $900m loss

A mix of falling revenues, high fuel-hedging positions and overcapacity will see Middle East airlines lose US$900 million (Dh3.3 billion) this year, according to a revised forecast by the International Air Transport Association (IATA).

Travel agents in the UAE, meanwhile, are expressing cautious optimism that travellers are slowly returning.

The speed and ferocity of the economic downturn in the final months of last year persuaded IATA to dramatically revise its forecasting yesterday. This year’s $900m loss is more than four times IATA’s prediction three months ago when it said its Middle East members would lose $200m.

Media circus distracts us from the main event

Along with the demise of investment banks, bundled securities, greed, and suburban living, let’s hope the global recession also does away with the 24-hour news cycle, that endless onslaught that is distracting us from the big picture.

The news last week that senior executives at American International Group, the ailing insurance giant and federalised money-pit, awarded themselves at least US$165 million (Dh606m) in bonuses triggered the inevitable Pavlovian response in the media.

Like iron shavings to a magnet, legislators raced for the TV cameras to exploit the popular ire.

Gulf states to issue bonds to cover debt

The central bank of Bahrain will issue bonds this year, one of a series of issuances planned by Gulf countries to finance potential budget deficits and bolster debt markets.

For 2009, Bahrain is budgeting for total expenditure of US$5.5 billion (Dh20.2bn) against income of $3.7bn, leaving a record projected deficit of $1.7bn. The bond issuance will help plug this gap.

“We are working on two issues, one in local currency and one in dollars,” the Bahrain central bank governor, Rasheed al Maraj, said at the GCC Banking Conference in Bahrain. “This will hopefully come soon. We are finalising the programme with the ministry of finance.”

VAT is not on the table

The UAE Government is not discussing value added tax (VAT) at the moment and would not be doing so in the near future, Emirates Business has learned.

According to Mohammed Ahmad bin Abdul Aziz, Director-General of the UAE Ministry of Economy, VAT is "not on the table". "It's not up for discussion… it's not on the table at the moment and we don't foresee that happening in the near future," he said on the sidelines of the Arab Investment Forum yesterday.

Hisham Abdullah Al Shirawi, Second Vice-Chairman of Dubai Chamber of Commerce and Industry, said he is not sure whether VAT will be implemented, adding that in times like these, the government is rather expected to lower its service fees.

Deadline for Gulf currency union extended

Gulf countries are extending a deadline to introduce a single currency for the oil-rich region owing to difficulties in thrashing out a common regulatory and monetary framework, a senior official admitted on Tuesday.

The six members of the Gulf Co-operation Council, a loose free trade area of Arab states, have long planned to introduce monetary union in 2010, but bankers have often questioned the feasibility of the deadline.

The countries, collectively known as the GCC, include some of the richest countries in the world, such as Saudi Arabia and the United Arab Emirates, and share a common language and culture.

Gulf emirates test appetite for bonds

Qatar and Abu Dhabi are testing the waters for benchmark bond programmes aiming to open capital markets and secure financing for ambitious development programmes, bankers say.

These oil-rich emirates want to tap investor interest in their diversifying economies as they seek to ease funding costs by helping foster domestic bond markets.

Abu Dhabi, the capital of the United Arab Emirates, is already testing the market for a deal that bankers estimate could raise about $2bn-$3bn, but may be part of a larger medium-term programme.

UAE, Kuwait most affected by global slump within region -- Deutsche Bank

Countries with economies that are more integrated into the global economic network are to be more seriously affected by the global slump, and this means the United Arab Emirates and Kuwait in the Gulf region.

However, Deutsche Bank CEO for the MENA region Henry Azzam told attendees at a seminar here Monday night that the fundamentals in the region are better than those elsewhere. He said the governments in the region have great room to maneuver investment and development in view of a population of 35 million supported by foreign assets at some USD 1.2 trillion.

The seminar addressed causes behind the current economic downturn and certain aspects of it which affect the region the most, and the expert said average growth rate forecast for this year was 1.5 percent for Saudi, 1.8 for Kuwait, 0.5 percent in the UAE, 1.2 in Oman, 1.5 in Bahrain, and 10 percent in Qatar.