Merger would create GCC’s fifth largest bank
Agreement among ADCB, UNB and Al Hilal will result in $110b in assets
The Abu Dhabi government is said to be weighing a plan to merge Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB) and Al Hilal Bank, creating an entity with more than $110 billion in assets.
ADCB and UNB said yesterday they are in “very preliminary” talks about a possible merger, as ADCB said it was also holding separate talks with Al Hilal Bank on potentially merging.
The banks, however, said that the “exploratory talks” may not end with a transaction.
The statements drove heavy buying activity on shares of both ADCB and UNB, which jumped as much as 15 per cent during trading hours. Share prices of ADCB ended 14.8 per cent higher and UNB’s ended 12.8 per cent higher.
If completed, the merger of the three banks will create the fifth-largest bank in the GCC, according to Bloomberg data.
It would also follow the merger of the UAE’s two largest banks in April 2017 to create the entity now called First Abu Dhabi Bank, which holds Dh691.6 billion in assets. It would also follow a wave of consolidation announced in other sectors last year.
15%
jump in shares of ADCB and UNB after news of merger talks
Abu Dhabi Commercial Bank (ADCB) and Union National Bank (UNB) both confirmed yesterday that they are in early talks about a potential merger.
In separate statements, ADCB and UNB said they have commenced “exploratory talks” regarding a possible merger between the two, but said the talks are at “a very preliminary stage” and may not result in a deal.
The statements come after a Bloomberg News report on Monday said Abu Dhabi is working to merge ADCB, UNB, as well as private bank Al Hilal into one bank that would have total assets worth around $110 billion (Dh404 billion).
ADCB said yesterday it has had separate discussions on a merger with shareholders of Al Hilal Bank, without confirming that all three entities might merge. UNB, meanwhile, did not say it held any talks with Al Hilal.
“Union National Bank announces the commencement of exploratory talks regarding a potential merger with Abu Dhabi Commercial Bank. Discussions are at a very preliminary stage and may not result in a transaction,” UNB’s statement said.
Both ADCB and UNB said they would update the market if and when there are “any material developments” on the issue.
A merger between the banks would follow a similar one between the National Bank of Abu Dhabi and First Gulf Bank, which merged in April 2017 to create First Abu Dhabi Bank. The merger created one of the Middle East’s largest banks by assets, with Dh691.6 billion worth of assets as of June 30, 2018.
It would also follow a wave of consolidation announced in other sectors last year amid slower economic growth and lower oil prices.
In 2017, Mubadala Development Company and the International Petroleum Investment Company merged to create Mubadala Investment Company, whose total assets are worth some $125 billion, making the company one of the largest sovereign wealth funds in the world.
The mergers of the two banks last year as well that of Mubadala and IPIC spurred speculation that other companies would follow suit, with many expecting a merger between ADCB and UNB as far back as 2016.
However, talks of the merger
The smashing hit of the last merger [NBAD-FGB] has possibly boosted the confidence of the regulators.” Aarthi Chandrasekaran | Vice -president at Shuaa Capital. Banks are a scale business & the merged entity can heavily benefit from synergies — both in terms of lower total costs & funding.”
Vrajesh Bhandari | Portfolio manager, Al Mal Capital
were never confirmed by the banks. In March 2017, Mohammad Nasr Abdeen, chief executive officer of UNB, dismissed talks of merging with ADCB. The CEO said “no discussions at all with any of the responsible peo- ple or even with the major shareholders” took place.
Neither ADCB nor UNB yesterday provided any details or a timeline for the possible merger, but analysts said there has been a “pressing need” for UAE banks to merge, considering how overcrowded the market is, with 49 local and international banks in it.
“The smashing hit of the last merger (NBAD-FGB) has possibly boosted the confidence of the regulators to merge the second largest bank in order to remain competitive,” said Aarthi Chandrasekaran, vice-president at Shuaa Capital.
“The merger will create the third largest bank in UAE by
This move will create a stronger organisation that can offer shareholders higher value for money.”
Issam Kassabieh | Senior Financial Analyst – Research Dept. Menacorp
UNB announces exploratory talks regarding a potential merger with ADCB.”
UNB’s statement
loan, with a combined market share of 18 per cent in loans and 15 per cent in assets. It will unlock value for UNB more than for ADCB, given their historically sub-optimal performance, and thus has scope for revenue synergies and cost synergies to play out to full potential.”
Other analysts agreed, saying that consolidation will help the UAE’s banking industry.
Charles-Henry Monchau, managing director and chief investment officer of Al Mal Capital, said that First Abu Dhabi Bank’s share prices have seen strong gains since the merger, giving comfort to other banks considering a similar move.