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First Abu Dhabi Bank proposes to remove foreign ownership limit

[DUBAI] First Abu Dhabi Bank PJSC proposed removing a cap on the foreign ownership limit in its sharers after the United Arab Emirates started loosening rules to attract international investors.

The board's proposal is subject to the supervision of regulatory authorities and would require amendments to the current laws and policies, the nation's biggest bank said in a statement. The move has "the potential that other public companies in the UAE may apply similar measures," it said.

This "is positive news for UAE banks as it may allow international banks to take strategic stakes in local lenders, especially for the mid to small sized lenders that are underperforming," Edmond Christou, a financials analyst with Bloomberg Intelligence, said by email. "This is likely to bring new skills, speed up digital transformation with knowledge sharing and international investments."

The UAE said this month it'll allow foreigners to own 100 per cent of businesses across industries. The federal government will leave it to individual emirates to "decide the ownership percentage in each activity according to their circumstances," said Prime Minister Sheikh Mohammed Bin Rashid Al Maktoum.

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FOREIGN INFLOWS

If publicly traded companies in the UAE allow foreigners to own 100 per cent of their shares, it could attract about US$4.5 billion in inflows from passive trackers of MSCI and FTSE indexes, according to EFG-Hermes equities strategist Mohamad Al Hajj. If active investors follow, that amount could double, he said.

The UAE, the second-biggest Arab economy, currently caps foreign ownership of businesses at 49 per cent, except in so-called economic free zones. First Abu Dhabi Bank's shareholders in February approved raising its foreign ownership limit to 40 per cent from 25 per cent.

First Abu Dhabi Bank's proposal comes after the market regulator in neighbouring Saudi Arabia removed the limit of ownership of publicly traded companies for foreign strategic investors. While the Saudi market watchdog has removed the cap, limits by other regulators or a company's own rules still apply.

First Abu Dhabi Bank in May asked MSCI Inc to clarify its decision not to increase the lender's weighting on its MSCI EM index. The index compiler's CEO said in an interview in March that a strategic stake controlled by Abu Dhabi's royal family was an obstacle for higher weighting.

First Abu Dhabi Bank's shares closed unchanged on Wednesday. They've risen 6.4 per cent so far this year, compared with a 3.4 per cent gain in the exchange's benchmark index.

The bank also reported second-quarter profit on Wednesday that topped analysts estimates. 

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