Amlak Finance expects profit this year to grow after agreeing with more developers to offer home loans for their projects, its chairman said.

Amlak posted its second-smallest quarterly profit in two years in the first quarter as higher costs and delays in property projects hit revenues.

Net profit dropped 35.4 per cent.

"Our goal is, toward the end of the year, to return to profit-growth and for 2007 profit to surpass last year," Nasser Al Shaikh said.

Amlak, in which Emaar Properties has a 40 per cent stake, made Dh130.42 million ($35.51 million) in 2006, 23 per cent more than 2005.

Competition in providing retail mortgages has intensified since UAE emirates, including Dubai and Abu Dhabi, opened their real estate sectors to foreign investment, triggering a property boom.

In Dubai, Amlak is in the "final stages" of talks with Sama Dubai, the real estate investment arm of Dubai Holding, about providing home loans to buyers at its developments, including the Dh65 billion waterfront Lagoons project, Shaikh said.

It also wants to provide home loans for more development projects managed Dubai Properties, he said.

In Abu Dhabi, where it provides mortgages for projects of Sorouh Real Estate, Amlak is in talks with real estate firm Manazel about providing home loans to buyers of its residences, he added.

"Our competition is getting very close. I don't think we have been aggressive recently," Shaikh said.

Amlak's main rival, Tamweel, posted an almost five-fold surge in first-quarter net profit to Dh50.47 million, more than double what Amlak made in the quarter.

Tamweel was more profitable because it focused more than Amlak on getting revenue from home loans on properties that would be delivered in the future rather than completed projects, said Azza Al Arabi, an equity analyst at EFG-Hermes.

"Amlak needs to diversify its revenue because there is always a risk property deliveries will be delayed," Arabi said.

Changes in senior management this year would help boost the Amlak's profitability, Shaikh said.

Amlak announced this week that Arif Alharmi, who headed commercial banking at HSBC's Islamic banking division, HSBC Amanah, would take over as chief executive by the end of the month.

Mohammed Al Hashimi, who has headed Amlak since 2001, and deputy chief executive Shahli Akram will both step down by the end of the month, Shaikh said.

"We have fresh blood in the company. I think things will pick up," Shaikh said.

Amlak's Egyptian unit will begin selling mortgages in June and become profitable next year, Shaikh said. It will also open in Saudi Arabia by the end of the year, and is considering expansion into Syria, Morocco, Pakistan and Turkey, he said.

Amlak, which wants to convert into a bank to take deposits if it gets regulatory approval, is talking to Emirates National Securitisation Company and banks about raising money through Islamic bonds or asset-backed securitisations, he said. TradeArabia News Service