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Abu Dhabi Merger to Create $175 Billion Banking Heavyweight

Category: Banking
Published: Saturday, 09 July 2016 18:25
Written by Super User
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National Bank of Abu Dhabi and First Gulf Bank won board approval on Sunday for a merger to create a banking heavyweight with $175 billion in assets, part of the emirates plan to revamp its economy hit by lower oil prices.

The newly-branded National Bank of Abu Dhabi will become one of the Middle East and Africas biggest banks when the tie-up is completed in the first quarter of 2017, rivaling Qatar National Bank, which has just purchased Turkeys Finansbank.

The tie-up comes as the Gulfs oil-rich countries take new steps to diversify their economies after two years of lower oil prices have weighed heavily on state revenues.

By creating a national banking champion, Abu Dhabi hopes to better service its own changing economy and those of the region, as well as take on global banking rivals at home and abroad.

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With a combined market value of $29.1 billion as of June 30, the new bank will overtake the likes of Britains Standard Chartered and Royal Bank of Scotland and Frances Credit Agricole.

The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAEs economic ambitions at home and drive the countrys growing international business relationships, the banks said in a joint statement.

The deal is one of two significant consolidation efforts currently underway in Abu Dhabi. Last week, the government ordered the merger of state investment funds Mubadala and International Petroleum Investment Company.

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Abu Dhabis efforts to reform the economy are considered slow compared with neighboring Saudi Arabia, which has adopted a much more radical approach to restructure the economy through a national transformation plan.

Even then, bank mergers are uncommon in the Middle East due to cumbersome regulation and an unwillingness by major shareholders to cede control, indicating significant government support for the deal between NBAD and FGB.

State investment funds Abu Dhabi Investment Council and Mubadala will hold 33.2% and 3.7 % respectively of the new entity, which will have assets worth 642 billion dirhams and a return on equity of 14.1% based on first-quarter figures.

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