ADCB in three-way merger talks
DUBAI: Abu Dhabi is engineering a second bank merger in its latest attempt to stay competitive in the era of lower oil prices. The shares of the two listed banks in the potential deal surged.
Three of its state-linked banks are in talks to combine into an institution with US$110 billion (RM455.4 billion) of assets, according to Abu Dhabi Commercial Bank PJSC (ADCB), one of the lenders.
The negotiations follow a tie-up between Abu Dhabi’s two biggest banks last year and the merger of sovereign wealth funds in March.
“This is entirely consistent with the moves over the last few years towards tighter financial control and elimination of duplicated costs in Abu Dhabi,” said Exotix Capital global head of equity research and strategy Hasnain Malik, here.
The shares of ADCB and Union National Bank PJSC (UNB) jumped by the daily limit of 15 per cent at the open in Abu Dhabi.
As oil prices settle at a new normal that’s barely enough to balance budgets in the Gulf Cooperation Council (GCC), Abu Dhabi, home to six per cent of global crude reserves, has stepped up efforts to create leaner and more competitive financial institutions.
It doesn’t have much choice. There are almost 50 banks operating in the United Arab Emirates serving a population of about nine million. Compared with Saudi Arabia’s 28 lenders catering to 33 million people, it’s not surprising that analysts have been saying the industry is ripe for combinations.
In the latest deal, listed lenders ADCB and UNB are considering combining with privately-held Al Hilal Bank to create the fifthlargest bank in the GCC. An agreement could be reached as soon as this month, said sources.
ADCB confirmed the negotiations were under way and said the discussions were “at a preliminary stage and may not result in a transaction”.