Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, has said the prospective merger of Abu Dhabi banks NBAD and FGB will make the emirate more competitive on the international financial stage and boost local business.
The comments came after the board of directors of the two banks unanimously voted to recommend to their shareholders a merger of the two Abu Dhabi listed banks in what would create a lender with US$175 billion in assets, the largest in the Middle East.
“The continued growth of our nation’s economy relies on an empowered private sector that contributes to the UAE’s dynamic and sustainable business environment,” the state news agency Wam reported Sheikh Mohammed as saying.
"The merger of FGB and NBAD will create high-value opportunities for the people of the UAE and further breadth to be internationally competitive, core aims of Abu Dhabi's Economic Vision 2030 and in keeping with the UAE's long-term economic ambition."
The two banks are proposing that the deal be done through a share swap in which FGB shareholders will receive 1.254 NBAD shares for each FGB share, the banks said in a statement. That gives FGB shareholders a 3.9 per cent discount based on the closing share prices on June 30, it said. Shareholders, however, would first need to give the proposal the green light before it goes through.
Under the proposed terms, FGB shareholders would own about 52 per cent of the combined bank and NBAD shareholders the balance. It would leave the Government of Abu Dhabi and related entities with a 37 per cent interest in the bank. Shares of FGB would be delisted and the bank would be called National Bank of Abu Dhabi. Both banks would continue to operate independently until the first quarter of next year, when the merger would be complete, if approved. Abdulhamid Saeed, a board member and the managing director of FGB, would be the chief executive of the combined bank.
“Now, more than ever, the UAE will benefit from a strong financial partner with the capacity to meet new challenges, drive domestic growth and support the country’s ever-greater connections to the global economy,” said Nasser Alsowaidi, NBAD’s chairman.
“Expansion across fast-growing emerging markets presents a vast business opportunity for our customers and for us as a larger, stronger, combined bank. We will have the capital, expertise and international networks to be the preferred financial partner for anyone doing business along the West-East corridor.”
Jaap Meijer, the head of research at Arqaam Capital, a Dubai investment bank, said the deal’s terms were robust even though they slightly undervalued NBAD and overvalued FGB. “Synergies should be very substantial, making the deal attractive for shareholders of NBAD and FGB, in our view,” he said. “The announced cost synergies of Dh500 million do not include potentially substantial financial and revenue synergies.”
Even though NBAD, the biggest bank by assets in the emirate, has made headway in building its consumer banking business in recent years, it would get a boost from joining forces with FGB, which has more loans to individuals on its books.
FGB’s retail book is about 40 per cent of its total loans, while NBAD’s consumer lending portfolio makes up just 17 per cent of its outstanding loans.
mkassem@thenational.ae
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