Dubai's ruler on Tuesday ordered the city-state's largest bank to take over struggling Dubai Bank, a lender with strong government ties that was rescued by the state earlier this year. Dubai's media office said Sheik Mohammed bin Rashid Al Maktoum directed Emirates NBD to acquire its smaller rival as part of government "efforts to enhance the banking sector in the emirate." "Dubai Government is keen to take the necessary steps to empower financial institutions to fully operate in a way that serves the national economy and consolidate the country's position as a first class international financial hub," it said. Financial terms were not disclosed. Rick Pudner, CEO of Emirates NBD, told reporters the deal wouldn't have a major impact on the company's balance sheet because of state assistance the lender received as part of the deal. "The Dubai government is fully supporting the takeover," he said. The deal shows "Dubai is very much determined to strengthen the financial marketplace here," he added. Dubai's government unexpectedly took over cash-strapped Dubai Bank in May. It vowed at the time to immediately pump fresh funds into the lender, though the amount of aid hasn't been disclosed. Before the takeover, Dubai Bank was jointly owned by Dubai Holding, the Dubai ruler's personal investment company, and Emaar Properties, the developer of the world's tallest building, Burj Khalifa. Executives declined to say how much assistance Dubai Bank has already received or how bad its books were before it was rescued. It hasn't published details of its finances since its 2009 annual report, when it posted a loss of 290.6 million dirhams (US$79.2 million). A division of Dubai Holding known as Dubai Group has spent months seeking to re-negotiate the terms on $10 billion in debt. The conglomerate owns property in the U.S. and has sizable stakes in several financial companies, including Europe's Marfin Popular Bank. Emirates NBD is among a group of major creditors Dubai Group is seeking new debt repayment terms from. Dubai has made considerable progress in sorting out its financial crisis, which rattled world markets when it came to a head nearly two years ago. But the emirate and its many state-linked companies remain heavily indebted, owing well over $100 billion to international and local lenders. The total size of the emirate's liabilities has never been disclosed. Emirates NBD is itself majority owned by the government through the Investment Corporation of Dubai. The holding company is widely seen as the healthiest of Dubai's major state-linked conglomerates, and includes industrial powerhouses such as Emirates airline and aluminum smelter Dubal. Emirates NBD's smaller shareholders seemed unenthusiastic about the Dubai Bank takeover. They sent shares falling 1.6 per cent to 3.74 dirhams ($1.02). The broader Dubai market was down just a tenth of a percent.
