A new letter of credit (L/C) provider is to open for business in Abu Dhabi, the largest and wealthiest of the United Arab Emirates (UAE).

Finance House will provide a range of services aimed at medium-sized corporates, government clients and some very high worth individuals.

Integrated finance company

The company that describes itself not as a bank but as "an integrated finance company providing comprehensive financing products and services," has obtained approvals from the UAE Central Bank and other relevant official agencies.

Finance House is to be a public joint stock company, capitalised at 200 million UAE dirhams, equivalent to around US$54.5 million.

Target markets

The characteristics of the new institution's founders provide some clues as to the likely activities and clients of Finance House. One of the founders, the Abu Dhabi Investment Company (ADIC), is government-owned and its investment division was established in 1994 with the specific aim of investing in industrial and commercial ventures that will support the diversification of the UAE's oil economy.

The UAE, and Abu Dhabi in particular, is on a mission that is proving rather successful in attracting classical heavy industries from ship-building to aluminium production, away from traditional industrial locations in North America and Europe. Finance House will almost certainly be targeting as clients the growing stock of such companies, and trade finance is likely to be a key requirement for several of them.

Government business

Another of the founders, investment company National Investor also focuses on making local investments on behalf of its shareholders and clients, several of whom are members of or have close connections with Abu Dhabi's ruling al-Nahyan family. This means some government business might well come the new institution's way.

Other founders include a large number of government, semi government, corporate and individual investors and according to a Finance House statement "this will help attract quality clients to the company and will provide support from an important segment of affluent corporates and individuals."

Activities

The activities of the company will include taking deposits from corporates and public institutions in addition to providing retail and commercial financing as well as a range of trade financing services, including L/C issuance and guarantees.

Perhaps the most attractive aspect of Finance House in a market that several analysts suggest is overbanked already is that after the founders have participated in a 45 per cent slice of equity, the remaining 55 per cent will be floated on the Abu Dhabi Securities Market later this year in an Initial Public Offering. It is reserved for UAE nationals only.

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