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Dubai Banks Raised at EFG as Prices ‘Attractive’ Amid Recovery

Emirates NBD PJSC (EMIRATES), the biggest United Arab Emirates bank, was raised to buy from neutral at EFG-Hermes Holding SAE, which cited attractive valuations boosted by a supportive economic backdrop in Dubai.

Emirates NBD’s price estimate was raised to 5 dirhams, implying a 27 percent increase based on yesterday’s closing price. Dubai Islamic Bank PJSC (DIB), the country’s largest Islamic lender, was also raised to buy with a price target of 2.8 dirhams, up from 2.1 dirhams. Emirates NBD shares rose 1 percent to 3.99 dirhams at 12:40 p.m. in Dubai. Dubai Islamic shares were unchanged at 2.07 dirhams.

“Dubai banks are attractively priced in both a historical and regional context,” Dubai-based Shabbir Malik and Riyadh- based Murad Ansari said in an e-mailed note today. “Dubai remains committed to maintaining the economy’s growth momentum going forward, which we believe is positive for Dubai banks.”

U.A.E. banks are showing signs of recovery after the global credit crisis weakened lending, crimped investment banking and spurred loan defaults. Emirates NBD’s fourth-quarter profit more than tripled while Dubai Islamic’s rose 85 percent. Emirates NBD trades at a price-to-book value of 0.6 times and Dubai Islamic at 0.8 times, compared with 1.4 times for the Bloomberg GCC Financial Index. (BGCCFINL)

Spending Binge

The government is projecting economic growth for Dubai, which went on a spending binge to turn itself into the Persian Gulf business hub before the global credit crisis, of 4 percent this year. Dubai officials announced plans for mega projects in November, including a district featuring the world’s biggest shopping center, as the emirate is set to benefit from a rebound in property prices.

Banks in the U.A.E., including Emirates NBD, have asked the central bank for permission to free up more funds for the real estate and construction industries as they seek to revive credit growth. Emirates NBD shares have rallied 40 percent this year, compared with a gain of 3 percent for Dubai Islamic and outpacing an advance of 17 percent for the DFM General Index. (DFMGI)

Three analysts, excluding EFG, recommend investors buy the shares of Emirates NBD, while three have a hold rating and one says sell, according to data compiled by Bloomberg. One analyst recommends buying Dubai Islamic, while one says hold the shares and three say sell.

Commercial Bank of Dubai PSC, whose stock has rallied 28 percent this year, had its price estimate raised 35 percent to 4.2 dirhams at EFG. The investment bank maintained its hold recommendation on the shares.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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