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Second merger wave may hit UAE lenders as industry shrinks

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Analysts said that the absence of common shareholders and a lack of cross-Emirate deals have so far hindered transactions.

Thursday 13, June 2019

(Bloomberg) --Banks in the UAE may go through a second wave of consolidation as lenders seek to improve profitability and tackle inefficiencies.

Edmond Christou, BI banking analyst, said, “Amid rising regulatory requirements and digital spending inefficient, less profitable and less well-capitalised banks are susceptible to consolidation.”

Abu Dhabi Islamic Bank (ADIB) and Commercial Bank International are among lenders that have under-performed in some areas and could benefit from commercially driven mergers, said Christou.

Additionally, Mashreq Bank and National Bank of Ras Al-Khaimah (RAKBANK) could be viewed as attractive targets, though Mashreq Bank’s less supportive ownership makes it a less likely candidate, added Christou.

Most bank mergers in the UAE have so far been driven by common shareholders, making it easier for deals to be completed. The Abu Dhabi government merged three of its banks after combining two of its largest lenders in 2017. 

Dubai Islamic Bank (DIB) approved a plan this week to proceed with the acquisition of smaller rival Noor Bank, both of which are controlled by Dubai’s main holding company.

“Local deals offer cost savings and scale, as well as accelerating digital transformation for smaller lenders, a third wave could be centred on industries undergoing reforms, such as insurance, which is less capitalised, advanced and incapable of supporting economic growth and savings cultures,” Christou said.

 

 

TAGS : RAKBANK, ADIB, Mashreq Bank, Dubai Islamic Bank, Commercial Bank International , Noor Bank, mergers and acquisition

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