Merger Talks Add $2 Billion to National Bank of Abu Dhabi Shares

  • NBAD surges 20% in two days after confirming talks with FGB
  • Other banks in emirate rallied on bets of more consolidation

Abu Dhabi’s biggest bank by assets gained more than $2 billion of market value in two days this week, spurred by merger plans that may create one of the Middle East’s largest lenders.

National Bank of Abu Dhabi PJSC rallied 20 percent in the period, the most since 2014, after the lender and First Gulf Bank PJSC said in a joint statement they’ve formed working groups to explore a potential combination. While FGB and other Abu Dhabi-listed lenders trimmed this week’s gains on Monday, the ADX Banks Index remains 6.7 percent above its Thursday close.

Banks listed in the emirate added more than $4 billion to their market value on Sunday amid speculation NBAD and FGB’s move may be the start of a new phase of consolidation in the United Arab Emirates’ banking industry. While a combination of NBAD and FGB would create an institution with about $170 billion in assets, it still leaves about 50 banks in the U.A.E. facing falling profits because of declines in government spending, slower economic growth and a drop in asset quality.

NBAD gained 4.4 percent on Monday to take the increase in its market value this week to 8.33 billion dirhams ($2.3 billion). FGB’s 3.4 percent drop cut its increase to 4 billion dirhams. Financial institutions including Abu Dhabi Commercial Bank PJSC, Union National Bank PJSC, National Bank of Umm Al-Qaiwain PSC and Bank of Sharjah are also still higher in the first two trading days of the week.

The U.A.E. needs more consolidation in its banking industry, analysts from EFG-Hermes Holding SAE and Emirates NBD PJSC said on Sunday.

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