First Gulf Bank Repays $1.2bn Government Support

The UAE’s Ministry of Finance placed Dhs70 billion ($19.1 billion) with banks after the 2008 financial downturn.

4. First Gulf Bank

2012 assets: $47,654,234 2011 assets: $42,880,963 Growth: 11.13% Net profit in 2012: $1,130,956 ROA 2012: 2.37%

Abu Dhabi-based First Gulf Bank has fully repaid federal government funds it received as support in the wake of the global financial crisis, it said on Monday, a move other banks in the country are expected to follow in 2013.

The United Arab Emirates’ Ministry of Finance placed Dhs70 billion ($19.1 billion) with banks to shore up balance sheets after the collapse of Lehman Brothers in September 2008 triggered a seizure of the world’s financial system.

However, banks were expected to prioritise repaying this support, converted into seven-year capital-boosting bonds in late 2009, this year as the value of the capital instruments was diminishing and banks could raise cheaper finance in the market.

FGB, the second-largest lender in the UAE by market value, repaid Dhs4.5 billion ($1.2 billion) to the ministry out of its own cash reserves, the statement said.

The repayment was made given the bank’s “very strong financial position by end of 2012,” the statement added.

The bank is the largest UAE institution so far to fully repay its bonds, which boosted Tier 2, or supplementary, capital.

Other banks have also been acting to address the bonds.

National Bank of Abu Dhabi originally converted Dhs5.6 billion of support into bonds but repaid Dhs2.6 billion last year, while National Bank of Ras Al Khaimah, the UAE’s ninth-largest bank by market value, repaid all of its Dhs684.5 million of support during 2012.

Last week, Abu Dhabi Commercial Bank raised a $750 million subordinated bond as part of a $1.5 billion two-tranche debt offering. Subordinated debt can be counted towards a bank’s Tier 2 capital ratio.