Published: November 11, 2008
The GCC’s banking sector is set for consolidation, and Abu Dhabi’s two leading banks, National Bank of Abu Dhabi (NBAD) and Abu Dhabi Commercial Bank (ADCB), could lead the way, according to the head of Shuaa Securities, Mohammad Ali Yasin.
Speaking at the Reuters Investment Summit in Dubai in late October, Yasin said: “I believe that toward the end of this year, or early next, you'll see major consolidation in the sector.” He added that he believed the merger of NBAD and ADCB could come first.
The executive director of private equity at the US$800bn Abu Dhabi Investment Authority, Hareb Al-Darmaki, told the audience of the Abu Dhabi Investment Forum in London on October 28 that he believed Abu Dhabi’s banks needed to get bigger.
Al-Darmaki said: “The larger our banks are, the better for the local economy, and for the global economy.”
The governor of the central bank of UAE, Sultan bin Nasser Al Suwaidi, also told reporters: “I support mergers in the banking sector.”
The CEO of NBAD, Michael Tomalin, said that NBAD would welcome a merger of the two banks. “"The management's view is that we need to be bigger to compete effectively on the global stage”, he said at the sidelines of the Abu Dhabi Investment Forum.
The merger of the two banks has been expected ever since the government of Dubai engineered the US$11.3bn merger of Emirates Bank International and National Bank of Dubai earlier this year.
ADCB’s results for the first nine months of the year have been disappointing, with profits only up 2% on the same period last year, while NBAD’s profits for the first nine months are up 43% on the same period last year.
The banking sector in UAE has been showing some signs of stress in the last few weeks, with Dubai’s financial sector in particular affected by low liquidity. Two of Dubai’s largest mortgage providers, Tamweel and Amlak, began merger negotiations in October.
The central bank of UAE responded to the liquidity shortage by setting up a Dh50bn emergency liquidity fund in September, followed by a further Dh70bn via the ministry of finance in October, backed up by a three-year 100% deposit guarantee.
Mark Yassin, senior general manager for investment banking at NBAD, says: “The banks in UAE, and Abu Dhabi in particular, are very resilient. Around 40% of their assets are in deposit form. And the majority of the big banks are already government-owned. We’re looking to become stronger and stronger compared to other banks from around the world.”