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Analysts: Decision good for Dubai
Analysts have given a warm welcome to the merger of Dubai's largest banks, not least because it serves the aspirations of the emirate itself.
- By Andrew Shouler, Financial Editor
- Published: 23:37 May 3, 2009
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Dubai: Analysts have given a warm welcome to the merger of Dubai's largest banks, not least because it serves the aspirations of the emirate itself.
"It's a very good move," said Karti Inamdar, banking analyst with Capital Intelligence. "I actually see plus-points all the way in a friendly merger of two healthy banks."
In preparation for the impact of WTO obligations, and the onset of foreign competition, "the advantages of having a large balance sheet are enormous", she added.
As liquidity ratios have been tightening around the banking system, the requirements of further credit growth have created pressure, which merger can alleviate.
"A bigger bank will be able to take more risk, since it has a greater capacity to absorb losses," Inamdar said.
As for the benefit, "the emirate will need a huge amount of funds over the coming years, and its flagship bank needs to be of a certain minimum size to make an impact in not just the regional market, but also in the international arena," she said.
Meanwhile, Standard & Poor's announced an upgrading of the outlook on the credit rating for both banks from 'stable' to 'positive', affirming the A/A-1 rating on both banks.
S&P described the new entity, if confirmed, as not only "one of the largest financial services institutions in the Middle East" but "systemically important" in Dubai.
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