Dubai Islamic Bank PJSC retreated the most in two weeks after United Arab Emirates lenders asked the central bank for five years to comply with requirements to reduce their exposure to the government.
Shares of Dubai Islamic, the U.A.E.’s biggest Shariah-compliant lender, fell 1.7 percent, the most since July 2, to 3.38 dirhams at the close in Dubai. The stock was the biggest decliner by index points on the benchmark DFM General Index, which ended an eight-day winning streak, decreasing 0.5 percent. Emirates NBD PJSC, Dubai’s biggest bank, lost 2 percent.
The U.A.E. Banks Federation said yesterday it was seeking an extension to comply with a central bank directive requiring banks to lend no more than 100 percent of their capital to local governments and the same to government-related entities, known as GREs. The rules were introduced more than a year ago after many banks suffered from an increase in bad loans linked to debt restructuring by GREs during Dubai’s property crash.
“The new regulation by the central bank had been received positively by the markets because it protects the banking sector from another crisis,” said Montasser Khelifi, Dubai-based senior manager for global markets at Quantum Investment Bank Ltd. “Now that the banks are asking for a delay of five years, that means that the recovery is still not complete and that the risky exposures are still important in the banks’ balance sheets.”
Dubai Islamic shares fell for the first time in nine days, trimming their advance this year to 68 percent. Emirates NBD’s stock rallied a similar amount in 2013 after the lender’s profit grew 31 percent in the first quarter.
Dubai, one of seven emirates that make up the U.A.E., is recovering after a property-market crash sent home prices tumbling more than 65 percent from a mid-2008 peak. The economy is set to grow 4.6 percent, on average, between 2012 and 2015, more than twice as fast as in the prior four years, government forecasts show.