First Gulf Bank Settles Government Loan Taken During 2008 Crisis
First Gulf Bank PJSC (FGB), a lender controlled by Abu Dhabi’s ruling family, repaid a 4.5 billion- dirham ($1.23 billion) loan to the government almost four years early after its cash holdings jumped.
The bank settled the entire amount owed to the United Arab Emirates Ministry of Finance yesterday by drawing on its “strong” cash reserves, First Gulf said in an e-mailed statement today. The loan was part of a 70 billion-dirham deposit program the government set up in the early days of the 2008 global credit crisis to help lenders cope with the fallout.
U.A.E. banks are recovering after the crisis triggered a slowdown in investment banking and a real estate crash led to a surge in non-performing loans. First Gulf Bank, which posted a 12 percent advance in profit last year, had cash reserves of 12.8 billion dirhams at the end of 2012, up 34 percent from the year earlier, according to data compiled by Bloomberg.
“The government’s timely and supportive decision allowed the U.A.E. economy to maintain its growth at a time when the global economic scene was facing difficult times,” Andre Sayegh, the chief executive officer, said in the statement.
Government assistance took the form of deposits, which lenders had the option of turning into subordinated loans eligible to be classified as Tier II capital.
Interest on First Gulf’s loan, which was initially due in December 2016, was scheduled to rise gradually from 4 percent in the first two years to as high as 5.25 percent from the fifth year onward, according to the lender’s 2009 annual report.
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