Abu Dhabi banks to merge into largest Gulf Arab bank

Sunday 18/12/2016
A customer uses an automated teller machine near the National Bank of Abu Dhabi headquarters in Abu Dhabi. (Reuters)

Dubai - Stockholders at two Abu Dhabi banks approved a plan to merge into the big­gest bank of all Gulf Arab countries with assets of $178 billion amid a regional eco­nomic slump.

Shareholders at the National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) approved the tie-up at separate meetings, a move first publicly discussed by the two financial firms in June.

Under terms of the deal, the combined company will be known as NBAD. FGB shareholders will re­ceive 1.254 NBAD shares for each FGB share they hold. After the deal is concluded, FGB stockholders will own 52% of the new bank.

Officials say the government of Abu Dhabi and government-relat­ed firms will own 37% of the bank, which would have a presence in 21 countries.

The chairman of the new firm is expected to be Sheikh Tahnoon bin Zayed al-Nahyan, a member of the Abu Dhabi ruling family. He serves as both chairman of FGB and as na­tional security adviser of the Unit­ed Arab Emirates, a federation of seven sheikhdoms on the Arabian Peninsula that includes Dubai.

“The overwhelming vote of sup­port from FGB and NBAD share­holders to approve this historic merger is a clear testament to the compelling rationale and value proposition for creating a bank with the financial strength, scale and expertise to deliver benefits for our customers, our sharehold­ers and for the wider UAE econ­omy,” Sheikh Tahnoon said in a statement.

Moody’s has said the merger would make the new NBAD the largest bank across Gulf Arab countries. In a statement after the votes, the two banks put their joint assets at $178 billion.

“The proposed merger is credit-positive for both banks,” Moody’s said in July. “NBAD’s pro forma credit profile will benefit from greater business diversification, stronger profitability and capital metrics, while FGB’s depositors and senior creditors will be trans­ferred to NBAD, a larger and funda­mentally stronger entity.”

The merger comes amid a re­gional slowdown in the Middle East, caused by the long slide in oil prices from more than $100 a bar­rel in mid-2014 to around $50 cur­rently. Lower prices have squeezed businesses throughout the region and slowed government-backed construction, leading to a rise in loan defaults.

In June, Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al- Nahyan ordered sovereign wealth funds Mubadala Development Company and the International Petroleum Investment Company to merge into a single entity hold­ing about $135 billion in assets.

NBAD also acknowledged it had financed a loan of $2 billion ahead of finalising the merger, which of­ficials said they hope would con­clude in the first quarter of 2017.

(The Associated Press)