DUBAI, (Reuters) – Dubai Islamic Bank is considering raising 3 billion dirhams ($817 million) in fresh capital and converting emergency government deposits into regulatory capital as Gulf banks brace for an economic slowdown.
The bank’s board of directors would discuss the two measures on March 25, the bank said on Tuesday in a statement on the bourse website.
The move comes as United Arab Emirates’ banks increase capital and emergency reserves following a central bank directive aimed at bolstering the sector against the impact of the global financial crisis that forced heavy writedowns in the region.
Investment bank EFG-Hermes recently said that Dubai Islamic faced writedowns due to the falling value of investments such as in Islamic lender Tamweel and Dubai property developer Deyaar.
A spokesman for the bank was not immediately available to comment.
Rival banks in the UAE have already launched similar moves.
Abu Dhabi’s Union National Bank said on Saturday it would convert 3.2 billion dirhams of state deposits, making it the latest to convert deposits from the government’s 70 billion dirham state facility into Tier 2 capital.
Other banks pursuing similar moves are top lenders the National Bank of Abu Dhabi and Emirates.
Ratings agency Standard & Poor’s recently warned that Dubai Islamic and other leading Dubai-based banks risked having their ratings downgraded as overall economic conditions in the emirate worsen, hitting the real estate sector in particular.
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