* Q2 loss on provisions
* Income from sale properties 1.7 mln dirhams vs 134 mln
By Tamara Walid
DUBAI, Aug 13 (Reuters) - Troubled Dubai Islamic mortgage lender Tamweel reported a 35-million dirham ($9.53 million) second-quarter loss on Thursday, as it boosted provisions against potential mortgage defaults.
Tamweel and rival lender Amlak Finance PJSC, whose shares have both been suspended since November, are being restructured by the government and may be merged as they suffer from a sharp downturn in real estate prices in Dubai's property slump.
Tamweel's net loss of 35 million dirhams in the quarter compared to profit of 211 million dirhams in the prior-year period.
It was Tamweel's third consecutive quarterly loss, and fell short of one analyst's forecast for profit of 4 million dirhams, according to a Reuters survey in July.
Tamweel said it booked 89 million dirhams in provisions against potential defaults on its books and to offset the decline in value of its property investments.
"The additional impairment provision on the home financing portfolio has been taken purely on a prudential basis, and the company has so far not faced any significant specific provision requirement," Tamweel said in a statement.
It said total provisions against its mortgage portfolio stood at 168 million dirhams at the end of June, with 140 million dirhams taken as prudential provisions.
Provisions against property investments were 120 million dirhams.
Earlier this month, ratings agency Moody's downgraded Tamweel's issuer rating, citing factors including its falling asset quality, higher funding costs and a slow state support process.
Tamweel said income from properties held for sale plunged almost 100 percent to 1.7 million dirhams in the second quarter, from 134 million dirhams last year.
Income from Islamic financing and investing assets fell 12.6 percent to 184 million dirhams from 211 million in 2008.
In the first half of the year, the lender had a loss of 75.8 million dirhams, compared with profit of 387.3 million dirhams in the same period last year.
Islamic financing assets made up 89 percent of the firm's total assets at the end of the six-month period while investment in real estate was 6 percent, it said. (Editing by Jason Benham; Editing by Rupert Winchester)