Abu Dhabi Stocks Surge Most Since 2014 on Mideast Mega Bank Deal

  • National Bank of Abu Dhabi, First Gulf Bank rally on merger
  • Emirate’s benchmark index advances most since December 2014

Abu Dhabi stocks climbed the most in 18 months as two of the emirate’s biggest banks said they’re in talks to merge in a deal that would form one of the Middle East’s largest lenders by assets.

The ADX General Index advanced 4.7 percent to close at 4,524.41, the strongest level in almost two months. National Bank of Abu Dhabi PJSC jumped 15 percent, the maximum allowed in a day, and First Gulf Bank PJSC rose 11 percent after the lenders said in a joint statement they’ve formed working groups to explore a potential combination. The volume of trading for both banks was the highest in at least a year. Dubai’s DFM General Index fell 0.3 percent.

The plan, which would create a bank with assets of about $170 billion, comes as the industry battles falling profits because of lower government spending, slower economic growth and a decline in asset quality. A successful deal between the two may pressure other banks in the United Arab Emirates to merge, according to a report by Arqaam Capital Ltd.

“Any signs of consolidation and cost efficiency is positive for the whole economy and companies’ balance sheets,” said Tariq Qaqish, the Dubai-based head of asset management at Al Mal Capital PSC. “NBAD will be growing its local market share while FGB will enjoy an international platform. It makes sense.”

More Mergers

NBAD is 69 percent owned by the sheikhdom’s investment arm, Abu Dhabi Investment Council. It closed last week with a market value of about $11.3 billion, about $3 billion lower than FGB. Traders exchanged about 4.2 million NBAD shares, the most since April 2015, and 13 million FGB shares, a November-2014 high.

Other banks may consolidate following a merger between NBAD and FGB, EFG Hermes Holding said in a note. Union National Bank PJSC climbed 7 percent, the most in more than three months. Abu Dhabi Islamic Bank PJSC, the U.A.E.’s second biggest Shariah-compliant lender, rose 4.6 percent and Abu Dhabi Commercial Bank PJSC jumped 6.7 percent.

Oil Gains

Bloomberg’s GCC 200 Index, a gauge of the biggest and most liquid stocks in the six-nation Gulf Cooperation Council, rose 0.8 percent. The gains follow a 4.2 percent surge in crude prices on Friday. The region is home to almost a third of the world’s proven oil reserves.

In Dubai, Emirates NBD PJSC, currently the U.A.E.’s largest bank and the product of a merger, climbed as much as 1.7 percent before falling 0.1 percent at the close. Moody’s Investors Service raised the lender’s credit rating by one level on Thursday.

Americana Deal

Kuwait’s SE Price Index advanced 1.2 percent, the most in more than four months. A U.A.E.-based investor group led by Emaar Properties PJSC Chairman Mohamed Alabbar, Adeptio AD Investments SPC Ltd., agreed to buy shares from the majority shareholder of Kuwait Food Co. for $2.36 billion. Shares of the company known as Americana, which operates KFC and Pizza Hut restaurants in the Middle East, were suspended.

Qatar’s QE Index rose 0.1 percent. The country’s Ministry of Development Planning and Statistics said it expects to see Qatar’s first budget deficit in 15 years in 2016. Oman’s MSM 30 Index was little changed.

Saudi Dividends

Saudi Arabia’s Tadawul All Share Index closed little changed. Saudi International Petrochemical Co., known as Sipchem, added 0.6 percent. The company said last week it issued a 1 billion riyal ($267 million) Islamic bond. Saudi Arabian Fertilizer Co. rose as much as 1.7 percent after the board proposed a 1.5 riyal per share dividend for the first half of the year before retreating 1.7 percent.

Egypt’s EGX 30 Index fell 1.1 percent. The central bank on Thursday raised the country’s benchmark interest rate by 1 percentage point to 11.75 percent, the highest level in at least a decade.

Israel Banks

Israel’s TA-25 Index rose 0.3 percent at the close in Tel Aviv after dropping last week for the second time in succession. Seventeen companies gained as Nice Systems Ltd. led the advance.

The Tel Aviv Banking Index increased for a fourth day, adding 0.6 percent. The Bank of Israel last week allowed local institutions to boost their holdings in the country’s lenders.

Israel’s 6.25 percent bonds due October 2026 fell, pushing the yield up three basis points to 1.77 percent.

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