Abu Dhabi Said to Mull More Bank Mergers After NBAD-FGB DealDinesh Nair, Stefania Bianchi, Arif Sharif and Archana Narayanan
Emirate is weighing merger of ADCB/UNB and ADIB/Al-Hilal
Abu Dhabi seeks to close NBAD/FGB before further combinations
Abu Dhabi is considering more mergers to boost its financial services industry after combining National Bank of Abu Dhabi PJSC and First Gulf Bank PJSC, according to four people with knowledge of the matter. Bank stocks surged.
The oil-rich emirate is weighing a plan to merge Abu Dhabi Commercial Bank PJSC and Union National Bank PJSC and also combine Abu Dhabi Islamic Bank PJSC with Al-Hilal Bank PJSC, the people said, asking not to be identified as the plans are private. Abu Dhabi is considering further deals only after the NBAD-FGB merger is completed by March 2017, the people said. No final decision has been taken and the emirate may not pursue the mergers, they said.
Abu Dhabi decided to combine its two largest banks in July to create a regional powerhouse with $175 billion of assets. The merger was seen as a precursor to more deals in the United Arab Emirates’ financial services industry, where about 50 lenders compete in a market of about 9 million people. The emirate has also announced plans to combine two of its largest sovereign investment funds International Petroleum Investment Co. and Mubadala Development Company PJSC, as well as mergers in industries from oil to education.
“There are many players in a market that is not expanding,” said Talal Touqan, the head of research at Abu Dhabi-based Al Ramz Capital LLC, a brokerage and investment bank. “It’s still premature to say how things will happen, but people are speculating on it. And that’s good.”
The deal between NBAD and FGB marks the country’s first major banking-industry merger since National Bank of Dubai and Emirates Bank International combined to create Emirates NBD PJSC in 2007. Shayne Nelson, the bank’s chief executive officer, has called for further consolidation, saying too many banks are serving a relatively small population.
Union National Bank shares closed up 12 percent in Abu Dhabi on Wednesday, posting its biggest gain since November 2015, while ADCB rose 5.8 percent. ADIB shares rose 4.7 percent. The broader Abu Dhabi Securities Market General Index rose 2.6 percent.
Abu Dhabi Investment Council, a sovereign wealth fund in the emirate, owns a 58 percent stake in ADCB and 50 percent of UNB, according to data compiled by Bloomberg. The fund also holds a 7.6 percent stake in Abu Dhabi Islamic Bank and a holding in Al-Hilal.
UNB, ADCB and ADIB declined to comment, while no one was immediately available to comment at Al-Hilal and ADIC. An official at Abu Dhabi’s executive affairs authority didn’t immediately return a call seeking comment.
The Abu Dhabi Securities Market Banks Index, comprised of 14 banking and financial services companies on the Abu Dhabi exchange, gained 2.6 percent on Wednesday, up the most since July 3. It has fallen about 6.7 percent this year. Banks, like other industries in the region, are under pressure as the drop in oil prices stifles Middle Eastern economies. ADCB’s third-quarter profit fell 17 percent from a year earlier as its impairment allowances jumped, the company said last month.
The case for a merger between Abu Dhabi Commercial Bank and Union National Bank became stronger after recent combinations in the U.A.E., investment bank Arqaam Capital said in a research report last month. ADCB which has a market value of about $8.6 billion, has $69 billion in assets, while UNB with a market value of $2.9 billion, has $29 billion in assets.