Emirates Islamic Bank plans $408m rights issue to add capital

Emirates Islamic Bank PJSC (the Sharia-compliant unit of the UAE’s biggest bank) is at a quest to raise Dh1.5 billion. This amount would be raised from a rights issue that is geared to boost capital amid a surge in lending.

It was announced yesterday that the offer has been approved by the board members and according to a statement on the Dubai bourse, it has been said that there will be a raise on the bank’s equity capital of about 38%. Rights share will be priced at 1 dirham. An extraordinary shareholder meeting will be called to seek approval for the plan.

Banks in the UAE are expected to set aside Tier 1 capital (which is equivalent to 8% of risk-weighted assets as an anchor against losses).

Central bank data states that, “Tier 1 ratio has fallen to 12 per cent. That’s less than 16.8 per cent average for peers at the end of June”.

“If the trend continues, we estimate that the bank’s capital buffer over the regulated level would be thin,” said Chiradeep Ghosh (an analyst at Securities & Investment Co in Bahrain).

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