Shares of National Bank of Abu Dhabi (NBAD) and FGB rallied on Thursday after shareholders of both banks approved a merger between them in what will create the Middle East’s largest bank, with US$178 billion in assets.
Investors are betting that NBAD’s ability to borrow cheaply because of its high credit rating and FGB’s strong consumer banking business as well as overall cost savings will propel the new entity’s growth at home and abroad.
NBAD rose by 2.6 per cent before closing 1.6 per cent higher at Dh10.05. Year to date, the stock has gained 26 per cent. Shares of FGB climbed by 2.8 per cent to Dh13. Since the start of the year, shares of FGB have also gained 2.8 per cent.
“We are positive on the merger because it will definitely lead to revenue and cost synergies,” said Sachin Mohindra, a portfolio manager at Invest AD, an Abu Dhabi-based asset manager.
“Both the franchises bring in some specific value. It will improve access to liquidity.
“The cost of funds for NBAD is fairly low so that will benefit the combined entity. Secondly, FGB brings in a very strong franchise in terms of the retail banking network. There are synergies that should be realised.”
The merger, plans for which were announced over the summer, was approved by shareholders at general assembly meetings late on Wednesday. The combination has also been approved by the Central Bank of the UAE but requires further approval from international regulators and the Securities and Commodities Authority.
These are expected towards the end of the first quarter of next year, the banks said.
The move is expected to produce cost savings of about Dh500 million a year from 2019, according to research from the Egyptian investment bank EFG-Hermes.
mkassem@thenational.ae
Follow The National's Business section on Twitter
