EBI-NBD merger to create bank with largest asset base in region

Dubai: The entity to be created after the merger of Emirates Bank International (EBI) and National Bank of Dubai (NBD) will have the largest balance sheet in the GCC, investment bank EFG Hermes said in a research paper. It will, however, still be "tiny" compared to major international banks.

EBI and NBD had combined assets of Dh165.15 billion and market value of Dh43.2 billion on March 20, according to EFG.

Their assets were eight per cent more than those of Saudi Arabia's National Commercial Bank, the larg-est GCC bank by assets.

In terms of market value, the two UAE banks were 67 per cent lower than Saudi Arabia's Al Rajhi.

"The combined entity will be the biggest bank in the Middle East by total assets, and the biggest bank in the UAE on most other measures. It will be somewhat smaller than Asian competitors ICICI or DBS, and still tiny compared to many of the international players participating in the UAE banking system," EFG Hermes banking analyst Raj Madha said.

Describing the banks as a "rather good fit" for a merger, Madha believes the Dubai government-led initiative is driven by both competition concerns and overseas ambitions.

"We believe the underlying rationale for the merger is both defensive, to prepare the bank for changes in the competitive landscape, and offensive, to strengthen the bank for new opportunities going forward, including expansion abroad," he said in his research note.

EFG Hermes expects the financial closure will occur in three to six months if progress continues on the merger process, which is being guided by a seven-member committee headed by Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman of Emirates Group.

It believes the merger will bring more than Dh90 million in annual cost savings.

Madha said an exchange ratio of 1.16 to 1.07 EBI shares per NBD share "would seem to be reasonable".