Complex Made Simple

GCC bank mergers is an unstoppable force to be reckoned with

Low oil prices in 2018 were partly responsible for precipitating GCC bank mergers. But now it just makes sense to do so.

The emirate plans to wait for ADCBC, UNB and Al Hilal Bank to close before starting fresh talks to condense the finance industry further Dubai Islamic Bank, UAE’s biggest Islamic lender said this April it was considering acquiring Noor Bank, and reach $76bn in total assets. Saudi British Ban (SABB) is expected to complete by mid this year an agreement to buy Alawwal, 40% owned by Royal Bank of Scotland Group.

In the UAE alone, 9.4 million people and growing have 50 banks competing for their time of day and dirham deposits. Bloomberg said there could be more mergers defining the banking landscape not just in the UAE but GCC wide.

The huge merger that may never happen

Underway are discussions for a possible marriage between Abu Dhabi Islamic Bank (ADIB) with First Abu Dhabi Bank (FAB), a merger that would create combined assets of around $234 billion (bn), and one of the Middle East’s largest lenders, according to Bloomberg, despite denials from both parties of such deal happening.  Fab itself was formed as a merger involving First Gulf Bank and National Bank of Abu Dhabi, and has total assets of around AED744bn ($202bn).

“The emirate plans to wait for a three-way combination of Abu Dhabi Commercial Bank PJSC, Union National Bank PJSC and Al Hilal Bank to close before starting fresh talks to condense the finance industry further,” sources told Bloomberg.  

Retuers reports that Abu Dhabi Commercial Bank (ADCB), 60% owned by the government and Union National Bank and Al Hilal Bank merged this Wednesday to create a banking heavyweight with AED423bn ($115bn) in assets, the third biggest in the UAE.

The merged ADCB Group, serving over one million customers accounts for a 21% market share of retail loans as at December 31, 2018.

“Shares in the new combined entity, which becomes the second biggest financial institution in Abu Dhabi, began trading on Wednesday after the merger plan was announced last September,” Reuters said.

More ongoing talks

According to Bloomberg Emirates NBD, Dubai’s largest bank is buying Turkey’s Denizbank AS for $2.8bn, for total combined assets of nearly $180bn. Kuwait Finance House offered to buy Ahli United Bank for a 6th position in the GCC or $97bn in combined assets.

Dubai Islamic Bank, UAE’s biggest Islamic lender said this April it was considering acquiring Noor Bank, and reach $76bn in total assets.

Saudi British Ban (SABB) is expected to complete by mid this year an agreement to buy Alawwal, 40% owned by Royal Bank of Scotland Group. This will create $68 billion in combined assets.

SABB in April announced that it will use Ripple for a new Instant Cross-Border Transfer Service under the patronage of the Saudi Arabian Monetary Authority (SAMA). In September 2018, SABB became the first Saudi Arabian bank to use the Ripple based R3 blockhain ecosystem as a tool to process financial transactions.

Bloomberg also reported that Shuaa Capital and Abu Dhabi Financial Group are considering a merger to reach combined assets of about $20bn. Alizz Islamic Bank and Oman Arab Bank have a similar idea but bringing only $8bn in total assets.

Reuters said shareholders of Sharjah's Invest Bank on Apr. 10 approved a proposal to hand the emirate's government a 50.07% stake in the lender and allow it to merge with one or more other banks without a vote. 

Finally, Saudi with a population of 32 million and 12 banks will see the conclusion of preliminary discussions started last December by National Commercial Bank (NCB), the kingdom’s biggest lender by assets, to merge with smaller rival Riyad Bank.