Shareholders of Dubai Islamic Bank (DIB), the UAE's biggest Sharia-compliant lender, approved the acquisition of Noor Bank through capital increase and share swap to make it one of the largest Islamic lenders globally with assets of more than Dh275 billion.
The transaction is expected to "enhance Dubai’s position as the capital of Islamic economy by creating the region’s most progressive Sharia banking group," DIB said in a regulatory filing to the Dubai Financial Market on Wednesday.
Bank mergers in the Gulf have picked up pace in recent years as lenders combine their balance sheets to gain scale while they face tougher competition and stricter regulations against the backdrop of a weaker global economy. Islamic banks in the Gulf will see "mid-single-digit growth" this year and next due to government spending on strategic initiatives and healthy oil prices, S&P Global Ratings said in a report in November.
"With the acquisition of Noor Bank, we are on track to expand our footprint in the region and beyond," said Mohammed Al Shaibani, chairman of DIB. "Completion of this deal will provide opportunities for economic growth, ensuring that the UAE’s financial sector remains at the forefront of the Islamic economy.”
DIB shareholders approved the acquisition through the increase of the bank’s capital from 6.58 billion shares to 7.2 billion, with a share swap ratio of 1 DIB to 5.49 Noor Bank shares. This translates into an issuance of around 651.1 million new DIB shares. Privatley-owned Noor Bank's operations will be fully-integrated into DIB, according to the statement.
"Integrating the two operations will generate significant synergies, leading to improved efficiencies and greater contribution to profitability with positive impact on shareholder returns," Adnan Chilwan, group chief executive of DIB, said.
DIB reported a 1 per cent year-on-year increase in profits of almost Dh1.25bn in the three months to September 30. Its nine-month net income grew 10 per cent to Dh3.97bn. The lender first announced proposals to acquire Noor Bank in April this year and recommended the deal to its shareholders in June. In November, DIB's board approved proposed terms for the takeover of its smaller rival.
Noor Bank had assets worth Dh46.5bn as of September 30, an 8 per cent decline since the start of the year, according to its filed accounts. It declared a 12 per cent year-on-year decline in net profit for the three months to September 30 of Dh185.3m.
The Investment Corporation of Dubai (ICD), the sovereign wealth fund of the emirate, is a common shareholder in both banks. ICD is the biggest shareholder in DIB with a 28.37 per cent stake, according to the bank's website. It has 22.85 per cent stake in Noor Bank.
DIB hired HSBC to advise on the acquisition deal while Noor Bank worked with Barclays on the transaction.
DIB shareholders approved the acquisition of Noor Bank during a general assembly meeting held on December 17, according to the bourse filing.
Acquiring Noor Bank would be beneficial to DIB and help consolidate the UAE's overcrowded banking sector, according to Egyptian investment bank EFG Hermes. There is room for more tie-ups among local lenders as the UAE is overbanked with 22 local and 38 foreign banks, most of which have "sub-optimal" market shares, it said in April.
