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NBAD and FGB merger on cards

Abdul Basit/Dubai
Filed on June 20, 2016 | Last updated on June 20, 2016 at 07.04 am
NBAD and FGB merger on cards
Analysts said an NBAD-FGB tie-up could mark the start of a wave of consolidation in the country's banking sector.

(KT file)

NBAD and FGB confirm merger talks to create Mideast's largest lender by assets


It's confirmed on Sunday that National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) are in talks to merge and create the largest lender by assets in the Middle East.

"NBAD and FGB have commenced discussions regarding the possibility of a merger of the two banks or a combination of the two businesses," according to a filing to the Abu Dhabi Securities Exchange on Sunday.

"Each bank has formed a Working Group made up of senior executive management to review the commercial potential along with any legal and structural aspects of a merger or combination. On completion of the review, the Working Groups will provide their recommendations to the respective Board of Directors of each bank. At this time, there is no certainty that discussions between NBAD and FGB will result in a merger or combination," it added.

A deal would create a lender with assets of about $170 billion and mark the first major banking merger in the UAE since National Bank of Dubai and Emirates Bank International combined in 2007 to create Emirates NBD.

NBAD, with a market value of about $11.3 billion at the end of last Thursday, is 69 per cent owned by sovereign wealth fund Abu Dhabi Investment Council. State-owned investment fund Mubadala Development is the biggest shareholder in FGB with a seven per cent stake. The bank's market value is about $14.4 billion, according to data compiled by Bloomberg.

Analysts said an NBAD-FGB tie-up could mark the start of a wave of consolidation in the country's banking sector, which is crowded with more than 50 banks.

The country's fragmented banking industry is ready for consolidation and a deal could prompt further transactions among lenders, according to investment bank EFG-Hermes Holding SAE. "There's no doubt it will lead to synergies and would give them a competitive edge, considering there are more than 40 banks in the UAE," Chiradeep Ghosh, a banking analyst at Securities & Investment Co in Bahrain, told Bloomberg.  "The combined entity will have a bigger equity book. That will help them to lend to larger entities and take up a greater share of the syndicated loan book," Ghosh added.

Credit Suisse Group is advising NBAD while UBS Group AG is working with FGB, people familiar with the matter said, asking not to be identified because the information is private. NBAD, FGB and Credit Suisse declined to comment.
NBAD is the UAE's second-biggest bank by assets, while FGB is fourth-ranked. A combination would help them overtake Emirates NBD as the country's largest lender and represent nearly a quarter of the system's loans and deposits, according to EFG-Hermes.

- abdulbasit@khaleejtimes.com





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