First Abu Dhabi Bank said it isn’t currently in talks with smaller rival Abu Dhabi Commercial Bank, denying a report that claimed the two were close to finalizing a potential merger.
"FAB strongly denies the report issued by Al Arabiya and currently has not entered discussions with ADCB to pursue any merger activity” the lender said on Wednesday. In a separate statement, ADCB also denied the report and said it is focused on implementing a five-year strategy.
FAB and ADCB are two of the biggest banks in the United Arab Emirates and a deal would create the largest Middle East lenders by assets. Abu Dhabi’s government owns a majority stake in both lenders.
"The desire to create larger, more efficient entities persists, even after the latest wave of mergers,” CI Capital analysts including Sara Boutros and Maryam Saleh wrote in a note. "In the case of FAB/ADCB, their common shareholding bode well for a merger.”
FAB shares have gained about 20% this year, valuing the lender at $67 billion, while ADCB rose 29%, taking its market capitalization to $21 billion. FAB has assets of $272 billion and ADCB at $120 billion, according to data compiled by Bloomberg.
FAB, which itself was formed as part of a merger between National Bank of Abu Dhabi and First Gulf Bank in 2016, is looking to expand as it vies with Qatar National Bank for the status of the biggest lender in the Middle East.
Expansion
"Creating a bigger entity at home could possibly help both entities achieve their international growth ambitions,” according to CI Capital analysts. They, however, warned that the timing is "tricky,” given FAB’s bid for EFG-Hermes Holding of Egypt and since ADCB recently concluded a three-way merger.
Any combination would create scale more than diversity, in terms of exposure, given the segmental overlap between the loan books of FAB and ADCB, the analysts said.
FAB offered to buy a majority stake in EFG-Hermes last month, valuing the firm at $1.2 billion. The lender has already expanded into Egypt by buying Bank Audi’s local unit and another takeover would give it a larger presence in the Arab world’s most populous country.
FAB has also embarked on a broad management overhaul that’s led to the departure of several executives in its private bank and investment banking division, Bloomberg News previously reported. It named Hana Al Rostamani as group chief executive officer last year.
