Abu Dhabi’s StanChart interest showcases global ambitions

Dubai: In April, First Abu Dhabi Bank pulled a $1 billion deal to acquire Egypt’s biggest investment bank. Just months later, it set its sights much higher.

FAB, which has grown into the Middle East’s largest bank by assets since it was created through a merger about six years ago, said on Thursday it explored a bid for Standard Chartered, but that it’s no longer considering an offer for the London-based lender.

FAB’s exploration of Standard Chartered highlights the growing ambition of Middle East lenders. It also showcases Abu Dhabi’s aspirations to play a bigger role on the international stage.

“The fact that FAB have looked at merging with an international bank of the size of Standard Chartered demonstrates the ambition of Abu Dhabi Inc. in growing its financial services reach to new geographic territories,” said Mohammed Ali Yasin, an Abu Dhabi-based, independent capital markets advisor and investor. The interest also “emphasizes its thought process of looking to grow exponentially rather than gradually to leap in size over local and regional competition.”

Economic growth

FAB was created when Abu Dhabi in 2016 combined two of its largest lenders “- National Bank of Abu Dhabi and First Gulf Bank. The new entity’s main purpose was to drive the UAE’s economic growth by lending to state entities and the domestic private sector. FGB had focused mainly on consumer banking and credit cards, while NBAD was bigger in wholesale banking and had expanded internationally.

About three quarters of FAB’s revenue comes from the UAE. The lender, which employs about 7,000 staff, derives about 43 per cent of its revenue from investment banking and last year worked on several high-profile transactions across the Gulf amid a flurry of dealmaking and initial public offerings.

FAB bought Bank Audi’s Egyptian unit in 2021, but hasn’t made any other significant acquisitions. Last year, it withdrew a billion-dollar bid for investment bank EFG-Hermes after facing lengthy regulatory delays in Egypt.

International Growth

Gulf-based lenders are now starting to look further afield. Saudi National Bank became one of Credit Suisse Group AG’s biggest shareholders following an investment late last year.

European banks, like Standard Chartered, are long used to backing of wealthy Middle Eastern investors. Credit Suisse already counts Saudi conglomerate Olayan Group and the Qatar Investment Authority among some of its top investors. Some of the region’s funds also stepped in to invest billions in lenders including Barclays, Credit Suisse and Citigroup during the 2008 financial crisis.

For FAB, its statement on Thursday means that it’s precluded from making an offer for Standard Chartered in the next six months, except under certain circumstances including a third party announcing a firm intention to make an offer.

Yasin says it makes sense for the Abu Dhabi lender to hold out for another ambitious deal.

“The market will benefit much more in future of such deals, if they took place, rather than looking at local mergers in UAE which won’t reap the growth benefits for FAB as much as international ones,” he said.