Abu Dhabi mulls merger to create banking giant

Bloomberg

Abu Dhabi is exploring a potential merger between three of its banks to create a lender with about $110 billion of assets as the oil-rich emirate moves ahead with the consolidation of state-controlled companies.
Abu Dhabi Commercial Bank PJSC (ADCB) and Union National Bank PJSC (UNB), which are both listed locally, are in talks to combine with privately-held Al Hilal Bank, according to people with knowledge of the matter. If successful, a deal could be announced as early as this month, two of the people said.
The potential tie-up would create the Gulf Cooperation Council’s (GCC’s) fifth-largest bank. ADCB has a market value of about $10 billion, while UNB’s is $2.9 billion.
The emirate’s two largest lenders — National Bank of Abu Dhabi and First Gulf Bank — completed a merger last year to create First Abu Dhabi Bank PJSC. A tie-up between Mubadala Investment Co. and the Abu Dhabi Investment Council in March created a sovereign wealth fund with about $220 billion of assets.

‘Feeling Competition’
“As the merger of FAB has played out positively, the smaller banks are feeling the competition now, forcing them to consolidate and stand up against the mega bank,” said Joice Mathew, the head of equity research at United Securities in Muscat. “This move might help in enhancing the competitive positioning of these smaller banks, especially ADCB.”
The UAE is home to more than 9 million people and has almost 50 banks, including the local units of Citigroup Inc. and HSBC Holdings Plc.
UNB shares rose 4.3 percent, while ADCB advanced 0.6 percent on Monday. The Abu Dhabi Securities Market Banks Index, which tracks 13 banking and financial services companies, has risen 26 percent this year, compared with a 12 percent gain for Abu Dhabi’s general index. Mubadala, which holds a 62.5% stake in ADCB and 50% of UNB through ADIC,
declined to comment.