Abu Dhabi bank merger to boost business, investment

Data indicate that the new banking group would have a customer base of about 1 million patrons and have a 15% share of the total assets portfolio of the UAE market.
Sunday 03/02/2019
A view of a branch of Abu Dhabi Commercial Bank in Dubai. (Reuters)
New opportunities. A view of a branch of Abu Dhabi Commercial Bank in Dubai. (Reuters)

LONDON - Three UAE banks announced a merger to create a banking group that would be the country’s third-largest financial institution and fifth largest in the Gulf Cooperation Council area in terms of assets.

A statement by Abu Dhabi Commercial Bank and Union National Bank said their boards agreed to merge and then acquire Al Hilal Bank, which would continue its operations as an Islamic bank.

The combined banks would retain the Abu Dhabi Commercial Bank (ADCB) name under assets of about $114 billion. The merger requires approval of regulators and shareholders.

The statement, released by the Emirates News Agency, said the share of the government’s Abu Dhabi Investment Council in the new bank would be about 60%.

“The merger of the three banks is in line with the economic vision of the UAE and is a strong banking group with human potential and financial capabilities that will enhance the competitiveness of the national economy and its future aspirations,” Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan posted on Twitter.

He said “the move contributes to enhancing the business environment and ensuring its sustainability, to supporting development projects and to creating investment opportunities in vital sectors according to the best international standards.”

The banks’ statement said the new banking group would benefit from “strong institutional support” through Abu Dhabi government ownership of a majority stake.”

Data indicate that the new banking group would have a customer base of about 1 million patrons and have a 15% share of the total assets portfolio of the UAE market, about 21% share in individual loans and up to a 16% share of total bank deposits in the country.

Until the merger goes into force, which is expected during the first half of 2019, the three banks will operate independently.

The merger comes two years after the largest merger in Abu Dhabi between National Bank of Abu Dhabi and First Gulf Bank, which led to the emergence of Abu Dhabi First Bank, the largest banking entity in the United Arab Emirates.

The statement said the merger would create a platform to support the growth of the new bank’s activities in retail and corporate banking sectors in traditional and Islamic banking.

It said the strategic objective of the new bank would be to increase market share through “excellence in customer service and continuing to innovate in the development of its products and services,” specifically through e-banking.

Moreover, the new bank would try to capitalise on its large business share by enhancing its ability to finance and support businesses and contribute to the growth and diversification of UAE’s economy, as well as invest in the development of human and technical resources and infrastructure.

Under the terms of the merger, shares in the new ADCB would be issued at a rate of 0.5966 shares for each Union National Bank share owned. When the merger is completed, Union National Bank shares will be delisted on the Abu Dhabi Securities Exchange. The merged bank will retain the legal records of ADCB.

The resulting entity would then move to acquire Al Hilal Bank for $272 million by issuing mandatory convertible financial instruments to the Abu Dhabi Investment Council.

New banking group officers include Eissa Mohamed al-Suwaidi as chairman of the board, Mohammed bin Dhaen al-Hamli as its vice-chairman and Ala’a Eraiqat as CEO.

Suwaidi said the merged ADCB would have the size and expertise needed to play a pivotal role in supporting UAE economic development.

Eraiqat said the transaction represented a milestone and a confident step towards establishing a financial institution with stronger potential, greater flexibility and a proven record of success in traditional and Islamic banking sectors.

The transaction is expected to achieve significant operational cost savings by about $167 million a year to improve the bank’s profitability and enhance competitiveness of its products and services.

It would contribute to the expansion of customer financing and improve the bank’s capacity to invest efficiently in future growth engines such as compliance systems, digital switching, e-security and a sophisticated branch network.