First Abu Dhabi Bank, Abu Dhabi Islamic Bank deny merger talks

First Abu Dhabi Bank’s head office at Khalifa Business Park in Abu Dhabi. (Reuters)
Updated 04 April 2019

First Abu Dhabi Bank, Abu Dhabi Islamic Bank deny merger talks

  • Bloomberg reported that Abu Dhabi was considering merging the two lenders to create the Gulf region’s largest bank
  • With around 50 banks, the crowded UAE banking sector has been squeezed by decreased government spending and lower profit margins

ABU DHABI: Abu Dhabi Islamic Bank (ADIB) and First Abu Dhabi Bank (FAB) denied on Thursday they were in merger talks after a news report said the emirate was considering combining them.

Citing unnamed sources, Bloomberg reported on Wednesday that Abu Dhabi was considering merging the two lenders to create the Gulf region’s largest lender. First Abu Dhabi Bank, the largest lender in the United Arab Emirates, in a bourse filing said it “strongly denies the report issued by Bloomberg on the potential merger.”

“FAB currently has not entered discussions with ADIB to pursue any merger activity,” it said.

ADIB, in a separate bourse filing, said the news report was not correct and that the bank is “currently not studying for any merger or acquisition.”

There has been speculation in recent months of more possible banking tie-ups in light of the wave of consolidation sweeping Abu Dhabi.

With around 50 banks, the crowded UAE banking sector has been squeezed by decreased government spending and lower profit margins.

Abu Dhabi’s two largest banks, First Gulf Bank and National Bank of Abu Dhabi merged in 2017 to form First Abu Dhabi Bank while another three-way merger of Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank is currently underway. Two of Abu Dhabi’s largest investment funds, Mubadala and International Petroleum Investment Company (IPIC) were also merged.


Easy credit poses tough challenge for Russian economy minister

Updated 18 August 2019

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.