What’s new: A few days ago the UAE issued a new law governing central bank and financial institutions. Article 76 of the new law (see attached) states that national shareholding in UAE banks must not be less than 60%, which means that foreign ownership limit (FOL) cannot exceed 40%. 
 
Our view: We believe this change should not have an impact on the banks in our coverage. The change implies that the banks whose FOL is more than 40% will have to bring it down to 40%. With the exception of ADCB, FOL for covered UAE banks is less than 40% and actual foreign ownership is even lower. Even in the case of ADCB, we note that available free float is only 37%, and actual foreign ownership is just 15%. That said, FAB, DIB and ENBD still have headroom to increase their FOLs considering that their current FOL is below the limit. We don’t expect the new Federal law to have any bearing on ENBD’s pending decision to raise their FOL.

Shabbir Malik, Rajae Aadel