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DIB to buy controlling stake in Jordan’s IDB

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Points of Essence:

  • Dubai Islamic Bank (DIB) marked its first overseas acquisition by taking over the Industrial Development Bank of Jordan.
  • The new entity will be converted into a Sharia-compliant institution. Its name will be changed to “Jordan Dubai Islamic Bank” as it would sell Islamic products to the Jordanian market.

By Andrew Foxwell

  • Last Updated: September 02. 2008 10:23PM UAE / GMT

Dubai Islamic Bank (DIB), in association with two finance houses, will buy a controlling stake in a small Jordanian bank, marking one of DIB’s first overseas acquisitions and a further spread of its Sharia banking products throughout the Middle East.

The takeover plan calls for Industrial Development Bank (IDB) – which is listed on the Amman Stock Exchange with a market capitalisation of 106.2 million Jordanian dinars (Dh554m) – to be converted into a Sharia-compliant institution, change its name to “Jordan Dubai Islamic Bank” and sell Islamic products to the Jordanian market.

DIB is working with Dubai International Capital and Jordan Dubai Capital to acquire a 52 per cent stake in the company.

Khaled al Kamda, the group managing director and chief executive of DIB, said the bank was intent on “expanding our business methods throughout the Arab and Muslim world”.

Walid Shihabi, the head of research at Shuaa Capital, said that while the Jordanian market did not yet have a large Islamic finance market, Sharia-compliant products would thrive in such a country.

“This is one of DIB’s very few forays outside of Dubai,” he said. “But Jordan’s banking sector is healthy and its stable economy means that the risk profile is low. This move could be an indication it is looking to expand outward.”

DIB already has subsidiaries in Pakistan and Sudan.

Some analysts express surprise at the deal – both at the small size of the takeover target and the fact that it is in Jordan.

“We knew that the Dubai Islamic Bank wanted to expand, but I expected it to go first into the GCC or North Africa,” said Raj Mahda, a banking analyst at EFG-Hermes. “All of the financial institutions are looking to expand beyond their borders, but the question is: where can you go? They often find that opportunities are limited in the GCC and prices are not cheap in North Africa.”

The Jordanian financial market is already popular with other GCC financial institutions. Last year, the Qatar National Bank acquired a 30 per cent stake in Jordan’s Housing Bank for Trading and Finance.

DIB claims it will modernise the Industrial Development Bank when the takeover is complete. Mr Shihabi said this was in line in DIB’s high reputation in the market.

“It is not just an Islamic bank, it is a successful bank,” he said.

“It is among the most advanced banks domestically and strong on a number of fronts; buying into a Jordanian bank allows it to grow the business and integrate at low cost.”

The IDB is one of the smallest banks in Jordan by market capitalisation.

DIB’s shares closed yesterday at Dh7.04 (US$1.9), down 1.81 per cent, before the acquisition news had been released.



Written by Suapi Shaffaii

September 3, 2008 at 6:22 am

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