Biggest Saudi bank begins talks to create mega lender

dubai — National Commercial Bank, Saudi Arabia’s biggest lender, started initial talks with Riyad Bank for a merger, a deal that would create an entity with $182 billion in assets.

Talks may not result in a transaction, National Commercial Bank said in a statement. The lender said it has coordinated the move with the central bank and that a deal isn’t expected to result in forced dismissal of staff.

Saudi Arabia is exploring potential mergers to boost its financial services industry after the combination of Saudi British Bank and Alawwal Bank, Bloomberg reported earlier Monday, citing people familiar with the matter.

The kingdom’s sovereign wealth fund, which owns stakes in some of the biggest lenders, is weighing which banks could be merged to increase scale and competition, the people said, asking not to be identified because the talks are private.

An agreement between National Commercial Bank and Riyad Bank could create the third-biggest lender by assets in the six-nation Gulf Cooperation Council, according to data by Bloomberg. The Public Investment Fund, Saudi Arabia’s main sovereign wealth fund, owns about 44 percent of National Commercial Bank and 22 percent of Riyad Bank, according to the data.

National Commercial Bank shares climbed 28 percent this year to trade near the highest level since they were sold in 2014. Riyad Bank has advanced 44 percent this year.

Merger mania

Banks elsewhere in the Middle East are also looking at consolidation. Three of Abu Dhabi’s state-linked banks are in talks to combine into an institution with $110 billion of assets. The negotiations follow a tie-up between Abu Dhabi’s two biggest banks last year and the merger of sovereign wealth funds in March.

In Saudi Arabia, the biggest Arab economy, HSBC Holdings Plc’s unit in October agreed to buy a local rival part-owned by Royal Bank of Scotland Group Plc in a $5 billion deal to create the kingdom’s third-largest lender.

There are fewer than 30 local and international lenders in Saudi Arabia, serving more than 30 million people. The neighboring United Arab Emirates has almost 50 banks catering to a population of less than 10 million.