Dubai’s ICD faces ‘adjustment’ in wake of pandemic downturn

Jewels in the crown: Dubai’s Atlantis The Palm hotel is one of a string of high-profile properties in the ICD portfolio. (Shutterstock)
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Updated 21 May 2020

Dubai’s ICD faces ‘adjustment’ in wake of pandemic downturn

  • Sovereign wealth fund turns its focus to ‘operating competitively when the health crisis subsides,’ says CEO

DUBAI: The Investment Corporation of Dubai (ICD), the sovereign wealth fund that holds some of the emirate’s most valuable assets, is to “adjust” its businesses in the wake of the downturn caused by the coronavirus pandemic.

The corporation announced a strong performance for 2019 — before the virus struck — with assets up to a record 1.12 trillion dirhams ($304.86 billion) and a 15 percent rise in profits to 25 billion dirhams, driven by its banking and financial businesses, including the Emirates NBD bank.

It handed over 18.08 billion dirhams to its shareholder, the government of Dubai — nearly 11 percent more than last year.

But Mohammed Al-Shaibani, executive director and CEO, warned that the outlook for this year was less positive.

“In 2020, with the significant disruptions arising in the wake of the COVID-19 crisis, we are focused on adjusting our operations to preserve their ability to operate competitively when the health crisis subsides,” he said.

In addition to Emirates NBD and the Emirates aviation business, the ICD also holds several other assets regarded as the jewels in the crown of the Dubai business scene. Via the ICD’s stake in property group Emaar, the Burj Khalifa and The Dubai Mall are included in its portfolio, as well as other hospi- tality interests such as the Atlantis resort on The Palm Jumeirah, and other hotel assets.

In the industrial sector, the ICD owns the ENOC oil and gas business, as well as an interest in the UAE’s aluminum processing operations. It also owns the emirate’s two stock exchanges and a variety of other retailing and trading businesses, including lucrative free zones in Dubai.

Some analysts believe that these assets could be vulnerable to the recession sparked by the pandemic. The Emirates airline is still considering when to resume full operations, while hotels and malls in Dubai have been severely affected by the economic lockdowns around the world and the absence of tourists during the emirate’s peak season.

But Al-Shaibani said: “We remain confident that ICD’s businesses can deliver sustainable returns over the long term for the prosperity of Dubai.”

The improved profits for 2019 came despite a slight drop in revenue — 1.9 percent down at 228 billion dirhams — caused by a fall in oil and gas income and “slightly” lower revenues from transportation, which still managed to grow profits significantly.

Banking and financial services turned in a record profit performance, boosted by the proceeds from the initial public offering of Network International in London last year. The results included a first-time contribution from Turkish financial group Deniz-Bank, acquired by Emirates NBD last year.

Al-Shaibani added: “In 2019, ICD produced a very solid performance given the considerable challenges faced by the global economy and the effect that these have had on our businesses.

“The diversification of our activities and their resilience in volatile markets are two significant contributing factors when it comes to delivering consistent performance year-on-year.

“Moreover, the record asset level reached by ICD, well in excess of the 1 trillion (Emirati dirhams) mark, reflects the continued growth achieved by our key businesses over time and the scale of their operations.”

The ICD said the big leap in net assets — up 27.5 percent — was mainly due to the inclusion of the Turkish bank and the implementation of new accounting rules on the valuation of leases, as well as business growth.

Liabilities also rose — up 35.6 percent — also reflecting the Turkish acquisition, to give a net asset value of 251 billion dirhams.

Dubai bankers speculated that the ICD could be a prime candidate to tap international bond markets later this year.

European bank ramps up stimulus package

Updated 05 June 2020

European bank ramps up stimulus package

FRANKFURT: The European Central Bank approved a bigger-than-expected expansion of its stimulus package on Thursday to prop up an economy plunged by the coronavirus pandemic into its worst recession since World War II.

Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by €600 billion ($674 billion) to €1.35 trillion and that purchases would run at least until end-June 2021, six months longer than first planned.

It also said it would reinvest proceeds from maturing bonds in its pandemic emergency purchase scheme at least until the end of 2022.

ECB President Christine Lagarde scotched speculation that the bank could follow the US Federal Reserve in buying sub-investment grade bonds, saying that option was not discussed by policymakers.

The announcement, which comes just weeks after Germany’s Constitutional Court ruled that the ECB had already been exceeding its mandate with a longstanding asset purchase program, prompted a rally in the euro and bond markets.

“Today’s easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the euro area survive the corona crisis in one piece. The ECB will do its part, and it hopes the governments will do their part,” Nordea analysts said in a note.

The bank dramatically revised downward its baseline scenario for euro zone output this year to a contraction of 8.7 percent from the modest 0.8 percent rise it had forecast only in March.

“The euro area economy is experiencing an unprecedented contraction. There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it,” Lagarde said.

She said she was confident that a “good solution” could be found on the legal stand-off with Germany’s top court.