FAB suspends acquisition talks for Bank Audi’s business in Egypt

Lender cites 'unprecedented circumstances and the uncertain outlook' during Covid-19 pandemic

First Abu Dhabi Bank has mutually agreed with Lebanon’s Bank Audi to stop the transaction process on the acquisition of its fully owned subsidiary in Egypt.. Chris Whiteoak / The National

First Abu Dhabi Bank, the UAE’s largest lender by assets, has mutually agreed to suspend acquisition talks on the proposed acquisition of the Egyptian subsidiary of Lebanon's Bank Audi.

"This is due to the unprecedented circumstances and the uncertain outlook relating to the Covid-19 pandemic, and is in the best interests of our shareholders, customers and employees," First Abu Dhabi Bank said in a statement to the Abu Dhabi Securities Exchange, where its shares trade.

The Covid-19 pandemic has hit the global economy, which is set to contract 3 per cent this year and is projected to slide into the deepest recession since the Great Depression, according to the International Monetary Fund. The outbreak has hindered international trade and paralysed a number of industries. Globally, banks' profits are being squeezed as they make more provisions for potential bad debts.

In January, First Abu Dhabi Bank which was formed in 2017 following a merger of National Bank of Abu Dhabi and First Gulf Bank, said it was in discussions with Bank Audi to acquire its business in Egypt. It also formed a working group on the potential acquisition. Lebanon's banks have come under pressure as their country faces the worst economic crisis in three decades and liquidity issues prompted the central bank to instruct local lenders to raise their capital by 20 per cent.

Bank Audi's Egyptian subsidiary has 50 branches with total assets of $4.4 billion (Dh16.1bn) at the end of September, Bank Audi's chief financial officer Tamer Ghazaleh told Reuters. The lender began operations in Egypt after acquiring Cairo Far East Bank in 2006.

First Abu Dhabi Bank reported a slide in first quarter net profit as it took "prudent" provisions amid challenging market conditions.

The bank’s net profit in the first three months of 2020 was down 22 per cent to Dh2.4bn due to higher provisioning while operating income fell 8 per cent year-on-year to Dh4.6bn.

Total assets, valued at Dh835bn, were up 14 per cent from last year while loans and advances rose 6 per cent during the first quarter to Dh382bn.

Last month, Kuwait Finance House also suspended its acquisition process of Bahrain’s Ahli United Bank until December, citing difficulty in finalising the transaction during the coronavirus outbreak.