GulfNews Business

RAKBank nine-month 2020 net profits down to Dh438.64m as provisions cross Dh1b mark

Banking|: Dubai: Third quarter profits at RAKBank were down to Dh132.02 million, from Dh284.48 million a year ago, with higher provisions being the main factor in the decline. For the first nine months, provisions went past Dh1 billion to Dh1.28 billion against Dh983.89 million. This weighed down nine-month net profits to Dh438.64 million, against Dh839.41 million a year ago. In a statement, the CEO, Peter England, seems to suggest the worst is behind it. "Since the gradual reopening of the business, we are seeing signs of improvement in the UAE economy,” he said. “However, customer demand for loans has declined considerably as many SMEs and individuals continue to take a cautious stand. “This combined with a low interest rate environment is providing challenges for the Bank’s top-line income. To help cushion some of this impact, RAKBank has taken a very proactive approach to cost optimisation. “Other than the continued precautionary loan loss provisions being taken under IFRS 9, the underlying asset quality of our book remains in decent shape.” Income dip Total income was down 8.1 per cent to Dh2.756 billion, mainly due to lower non-interest income - by Dh114 million – and of net interest income. There was also lower contribution from its Islamic products “because of a declining balance-sheet and lower margins”. "The third quarter remained challenging, and we have to expect this trend to continue for next few quarters at least as it takes time for the gradual recovery to flow through the economy and begin to translate into improved performance," the CEO added. "In the meantime, however, we have used this time to make significant progress in our digital transformation including launching our new mobile app and a host of digital initiatives in the SME space in the third quarter."

GulfNews Business

Small developers in Dubai have options other than banks to get a project off the ground

Property|Analysis|: To get a project funded, it is essential for a developer to demonstrate a track record of timely project completion. However, it is observed that, today, most of the banks have a very low appetite to fund private developers. Also a few banks that do some funding for smaller developers have a differential lending criteria vis-a-vis large names - and regardless of the track record of small developers. This will then require private developers to reach out to non-banking financial companies even when they charge predatory financial costs. The developer must demonstrate a clear vision about the size of a project, so that it is within his capabilities and capacity. It is essential that developers also outline all the “soft costs” associated with the projects, including obtaining permits along with engineering, infrastructure and other construction-related costs. Never lose sight of estimates Developers must have all finances pertaining to the project well-documented, to provide the financer a detailed estimate of all the costs incurred on the project. Good financial discipline is extremely essential for the success of a project, and may include - but is not limited to - timely vendor payments, and ensuring contractors and workers associated with the project are paid on time. Real estate financing requires meticulous planning on part of the developer to obtain all of the desired objectives. To make the project viable, the developer must work extensively to optimize project costs through value engineering, the building’s design, sourcing of materials through the supply chain – and all done in advance. Be open to multiple funding options These must be done before narrowing down to a particular financing route. Developers can also consider taking expert advice from consultants specializing in project funding, who can recommend appropriate methods. - Developers can also opt for debt financing, as a funding avenue for their projects, wherein the developer can borrow money from a creditor, after having discussed the terms for future repayment in advance. This requires keeping track of periodic or regular interest payment, calculated based on a previously agreed upon coupon rate. Tap other developers' interest Some other avenues developers can consider for raising funds to complete their project include applying for a grant where a certain amount of money will be provided by a government body or organization to fulfill a particular project. It would be beneficial to partner with other real estate developers who can help manage the costs by sharing buildings, equipment, expertise and workloads. Sales can provide source of income, however, if private developers launch multiple projects in a year, they should be extremely careful to be able to demonstrate strong sales and insure that the projects have sufficient net worth to service the debt in case a drop in sales has been witnessed. Kalpesh Kinariwala is Chairman of Pantheon Group.

GulfNews Business

Iraq’s Rasheed Bank provokes anger with second marriage loan offer

Mena|Banking|: Cairo: An Iraqi state-owned bank has provoked anger among pro-women advocates after it announced a loan for civil servants marrying for the second time. Al Rasheed Bank said that would-be beneficiaries from the loan of 10 million Iraqi dinars (8,389 dollars) should not have previously got a marriage loan and should be in service for at least two years. “A marriage loan will be offered to the civil servant married for the second time on condition neither he nor his first wife has benefited from a marriage loan,” the bank said in a statement, according to Iraqi media. The offer has drawn sharp criticism. “It is shameful that such a statement comes from a respectable government bank. Women are not a commodity for display or sale,” Hanan Al Fatlawi, an advisor to the Iraqi prime minister for women’s affairs, tweeted. Iraqi lawmaker Rizan Al Sheikh urged Prime Minister Mustafa Al Kadhimi to step in and scrap the controversial loan that it described as a sign of “administrative confusion”. She was quoted as threatening street protests unless the decision is revoked. “Government and private banks should shift towards a policy of employing the woman and motivating her success by offering loans for small-scale projects instead of turning her into a commodity through unfair decisions,” Al Sheikh. In reaction, the bank denied that the loan is aimed at encouraging second marriages. “It is meant for those who are divorced and widowed, and people with special family circumstances, the bank said. “As a bank, we have no legal right to prevent or encourage second marriage. This loan is available for men and women, and designated for those whose circumstances may oblige them to marry again,” it added. Iraq is grappling with a tough economic crisis amid falling oil prices and COVID-19 spread.