First Gulf Bank (FGB) and National Bank of Abu Dhabi (NBAD) have announced their intention to merge by Q1 2017, forming the largest bank in the Middle East and North Africa with assets of AED642bn (US$175bn).
The new bank will keep the NBAD branding and be based in Abu Dhabi, with a presence in 19 countries. It will own 26% of outstanding loans in the UAE, giving it the largest market share in the country.
The transaction is proposed as a merger of equals, to be executed through a share swap following which FGB shareholders will own approximately 52% of the combined bank and NBAD shareholders will own approximately 48%. The government of Abu Dhabi and related entities will own approximately 37%.
The new bank’s board will include four directors of FGB and four directors of NBAD. Sheikh Tahnoon Bin Zayed Al Nahyan (pictured left), currently chairman of FGB, is set to be chairman; Nasser Ahmed Alsowaidi (pictured right), currently chairman of NBAD, will be vice-chairman, and Abdulhamid M Saeed, currently board member and managing director of FGB, is the CEO designate for the combined bank.
Until the merger is effective, Andre Sayegh and Alex Thursby will continue to lead their banks independently as group CEOs of FGB and NBAD respectively.
Al Nahyan says: “The new, well-balanced bank will be an engine of UAE growth, driving further investment and economic diversification, and advancing the ambitions of entrepreneurs and the people they employ.
“The bank will have the strength and expertise to support the development of the UAE’s private sector, from SMEs to large companies gathering strength to expand beyond their national borders. It is well positioned to be the strategic banking partner to the government and its agencies.”
Alsowaidi, adds: “Now, more than ever, the UAE will benefit from a strong, financial partner with the capacity to meet new challenges, drive domestic growth, and support the country’s ever-greater connections to the global economy.
“Expansion across fast-growing emerging markets presents a vast business opportunity for our customers and for us, as a larger, stronger, combined bank.
“We will have the capital, expertise and international networks to be the preferred financial partner for anyone doing business along the west-east corridor. And we will act as the primary link for businesses and governments that want to access regional and global capital markets.”
According to the banks, loans to the corporate sector will represent 52% of the new entity’s total loan book, with loans to the retail sector accounting for 26% and loans to the government sector representing 22%.
The merger, which is still subject to the approval of at least 75% by value of the shares represented at an upcoming joint general assembly, is expected to save about AED500mn (US$136mn) a year over three years, with a one-off integration cost of around AED600mn (US$163mn).
The banks were unable to answer GTR’s request for more information on the structure of the new bank’s trade finance department and any staff changes that will ensue. However, a joint statement says that “attracting and developing high-performing UAE nationals is a central priority”.
Credit Suisse and UBS Investment Bank are acting as financial adviser to NBAD and FGB, respectively. Allen & Overy and Freshfields Bruckhaus Deringer are acting as legal adviser to NBAD and FGB, respectively.