The UAE’s First Abu Dhabi Bank and Abu Dhabi Commercial Bank are close to finalizing a potential merger that would broadly target a synergy of operations in the capital’s two largest banks, at a time when the UAE banking sector is witnessing fierce competition and a glut of banks operating in the market, according to three sources familiar with the matter. For “Al Arabiya.net”.
One of the sources said that the potential deal has been being prepared for months, and that if an agreement is reached, it may be announced in the second or third quarter of this year at the latest, after obtaining the approval of the regulatory authorities.
The merger, if completed, would create the largest banking entity in the region in terms of assets. Al Arabiya.net’s accounts indicate that the potential new entity will have assets of more than $350 billion, which puts it ahead of Qatar National Bank, which currently tops the list.
The two banks are listed on the capital market, Abu Dhabi, and their combined market value is more than 320 billion dirhams, according to Abu Dhabi money market data at the end of trading on Monday.
fusion mechanism
While the potential merger process is moving forward, banking sources indicate to Al Arabiya.net that the potential deal will result in the complete termination of the Abu Dhabi Commercial entity after unifying its business with First Abu Dhabi Bank, merging the business and unifying the business rules of the two banks.
The First Abu Dhabi Bank was established mainly after the merger of the First Gulf Bank and the National Bank of Abu Dhabi in 2017, while the Abu Dhabi Commercial Bank group was formed in 2020, through a merger also with Union National Bank, and the acquisition of Al Hilal Bank.
“We will definitely see a share swap in the deal and it’s currently being looked at… I think the swap factor won’t leave the area of 2-3 ADCB shares for every FAB share,” the source said.
A spokesman for First Abu Dhabi Bank, in a telephone conversation with Al Arabiya.net, declined to comment on the matter.
consistency with policies
The deal, upon its completion, is consistent with the current policy of merger and synergy that the UAE banking sector is witnessing in the recent period to face the repercussions of the pandemic and burning competition.
A banking source told Al-Arabiya.net, “The deal seems somewhat logical if we look at the strength of the nascent entity, as well as the facts on the ground, given the number of large banks operating in the market, given the population.”
Official data of the UAE Central indicate that the number of banks operating in the market, including local and foreign, is about 59, which classifies the UAE as one of the largest countries in the world in terms of banking coverage, given the population.
“Synergy in operations and spending control in general is a government trend in the UAE, including institutions in which government-affiliated companies have controlling stakes,” the source added.
Mubadala, the investment arm of the sovereign fund in Abu Dhabi, is one of the largest shareholders of the two banks, with a controlling stake of about 60% in both.
Jobs at stake?
However, the possible merger process may include the reduction of thousands of jobs in Abu Dhabi Commercial, according to what a banking source briefed on some details of the plan told Al Arabiya.net.
“It is normal to witness job cuts after the synergies process between the two banks given the large workforce size in the two banks,” the source said.
Abu Dhabi Commercial Bank has about 9,000 employees, while the number of First Abu Dhabi Bank employees is about 5,000, according to the bank’s official website.
A number of those who recently lost their jobs at Abu Dhabi Commercial Bank believe that their leaving has been widely linked to the potential deal.
Al Arabiya.net contacted at least two people who confirmed that their job losses were linked to a possible reduction in the bank’s workforce, as it prepared to merge with another bank.
A former analyst in the bank’s risk and credit department, who lost his job about two months ago, said that he had reported about the reasons related to his loss of his job, which included a broader plan to cut jobs in the bank ahead of a possible merger deal.
The analyst, who declined to be identified, added that there is talk of writing off at least 6,000 jobs in the group in several stages, to be completed with the completion of the merger process.
It was not immediately possible for Al Arabiya.net to confirm the validity of the job loss plan referred to, while a bank spokesman did not respond to repeated calls from Al Arabiya.net to comment on the matter.