UPDATE 1-Dubai's Tamweel back to profit, Q3 net down 95 pct

By Jason Benham

DUBAI, Nov 22 (Reuters) - Troubled Dubai Islamic mortgage lender Tamweel's returned to profit after posting losses for three consecutive quarters, but its third-quarter earnings plunged 95 percent as it took provisions.

Tamweel and rival Amlak Finance are expected to be merged in the first quarter of 2010, Tamweel's chairman Sheikh Khaled bin Zayed al-Nahyan said on Friday.

Both stocks have been suspended since November 2008.

Tamweel recorded a third-quarter net profit of 10 million dirhams ($2.72 million) and took impairment provisions of 53 million dirhams in the quarter, it said in a statement on Dubai's bourse website on Sunday.

The firm's earnings beat an analyst forecast of a loss of 37 million dirhams in a Reuters survey in October.

'In light of the adverse market conditions, tight liquidity and falling real estate market, Tamweel has taken additional prudential provisions ... for potential delinquencies on its asset book and to offset the decline in market value of its property investments,' it said in the statement.

Tamweel made a net profit of 185.7 million dirhams in the third quarter last year.

It made a net loss of 65 million dirhams in the first nine months of the year, compared to a net profit of 573 million dirhams in the same period in 2008, it said.

As of Sept. 30 total provisions against the home finance portfolio was 195 million dirhams, of which 154 million was prudential provision, it said, adding that provision against property investments was 170 million dirhams.

Islamic financing and investing assets reached 10.4 billion dirhams.

The United Arab Emirates government said in November 2008 it would merge Tamweel and Amlak and a state panel led by the economy minister has been reviewing the plans. Last month, the minister said the panel is recommending merging the two lenders into a single, Islamic bank early next year.

Like many other banks and mortgage finance firms, Tamweel was forced to raise its provisions for bad loans and saw defaults on home payments.

Sheikh Khaled said on Friday that its default rate had retreated from a peak of 3 percent recently and 'has been coming lower'.

The mortgage lender had taken around 400 million dirhams in provisions over the past 18 months, he said.

Sheikh Khaled, who is a member of the ruling family of Abu Dhabi, the largest in the seven-member UAE federation, said he expected shares in the merged company to begin trading once the tie-up was completed.

(Editing by Inal Ersan) ($1=3.673 dirhams) Keywords: TAMWEEL EARNINGS/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.