Amlak Finance, the Dubai mortgage lender whose shares were frozen for six years after the 2008 financial crisis, reported a huge increase in third-quarter profits yesterday.
Net profits for the three months to the end of September increased to Dh55.5 million from Dh6.1m it made during the same period a year earlier, the Sharia-compliant lender said.
At the same time revenues rose 11.3 per cent per cent to Dh116.3m from Dh104.4m a year earlier.
However, Amlak which resumed trading on the Dubai Financial Market in June after the company completed a financial restructuring, said that the income it received from its core business of Islamic financing and investing assets actually fell 19.3 per cent to Dh72.1m, down from Dh89.4m a year earlier.
The company made up some of the difference through sales of real estate assets at Nad Al Hamar east of the Dubai Creek, which fetched Dh23.5m during the three-month period.
Amlak’s rental income for the quarter also increased 43 per cent to Dh11.6m. The company said this was a result of “more rental income generation and recoveries from further foreclosed units”.
Analysts said that the results suggest that the company is continuing to move away from providing mortgage financing, and towards acting as a property developer.
Profits for the first nine months of the year came in at Dh66.3m, down 14.7 per cent from the Dh77.8m Amlak booked a year earlier.
The company said that this was the result of it issuing a Dh1.3 billion Mudaraba contract to its financiers. However, it added that it had already redeemed Dh 200m of the Mudaraba Instrument, within the first year of its restructuring funded by payments received from sales of Nad Al Hamar land.
“We have proactively paid Dh200m to our financiers for redemption of the Mudaraba instrument within the first year of our financial restructuring, which demonstrates our commitment to quickly turning around our business and continue with our growth path to reposition Amlak as a leader in real estate financing in the region,” said Arif Alharmi, managing director and chief executive of Amlak.
Amlak, of which Emaar Properties owns 45 per cent, had faced collapse as the housing bust in 2009 came close to wiping out the value of its property portfolio.
A mismatch between the short-term bank financing Amlak relied on, typically renewed on an annual basis, and its long-term mortgage liabilities left it vulnerable to short-term changes in banks’ willingness to lend.
When the collapse of Lehman Brothers in September 2008 precipitated the biggest financial crisis in recent memory, Amlak’s creditors proved unwilling to roll over their funding arrangements with the lender.
The subsequent collapse of property prices in Dubai, in which houses lost up to half of their value on average, meant that Amlak took a major hit to its portfolio of mortgage loans and properties.
In August, Amlak reported an 87 per cent decline in second-quarter profits, driven by a fall in revenues.
In June the company announced that it was in discussions with Emaar Properties about forming a joint venture to develop land.
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