UAE banks NBAD and FGB confirm merger talks

Updated 19 June 2016

UAE banks NBAD and FGB confirm merger talks

ABU DHABI: Shares in National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) soared on Sunday after they confirmed discussing a possible merger to create what would be one of the largest banks in the Middle East and Africa.

Both banks have close links to the Abu Dhabi government, which has been cutting costs and restructuring its assets to increase efficiency as low oil prices slash its revenues.
Analysts said an NBAD-FGB tie-up could mark the start of a wave of consolidation in the UAE banking sector, which is crowded with more than 50 banks and squeezed by lower government spending and tougher global capital rules.
Reuters, quoting sources aware of the matter, had reported earlier that the two banks were in preliminary talks on a merger.
In Sunday’s statement, the banks, Abu Dhabi’s largest and third largest lenders by assets, said each had formed a working group to “review the commercial potential along with any legal and structural aspects of a merger or combination.”
The groups would provide recommendations to their respective boards of directors.
Many analysts said that in the absence of details of how and when the merger might take place, buying the stocks in response to the merger news was risky.
“Shareholders have nothing to gain, in our view,” wrote analysts at HSBC, adding that any share swap to pay for a merger could dilute the value of holdings in both banks.
But local investors welcomed the idea of an Abu Dhabi mega bank, pushing NBAD shares up their 15 percent daily limit on Sunday while FGB rocketed 11.5 percent. Shares in other Abu Dhabi banks also climbed on speculation that they might eventually be involved in an M&A wave.
NBAD is 70 percent owned by the Abu Dhabi Investment Council, and FGB is controlled by members of the emirate’s royal family. That means that if there is political will to complete the merger, it will be easily accomplished, said an Abu Dhabi-based investment banker with a foreign institution.
“Size does matter in banking, be it for lending or deposits, future expansion, limits on exposure to single borrowers...as well as to support the economy,” he said.
A larger bank would help Abu Dhabi’s aspiration to become a major financial center, said a government source. The emirate is launching a financial free zone, Abu Dhabi Global Market, to attract foreign investment.
A merger between NBAD and FGB would create a bank with assets worth around 627 billion dirhams ($171 billion), according to figures they gave for the first quarter of 2016.
That would exceed the first-quarter assets of the region’s current largest bank by assets, Qatar National Bank (QNB) , which had 550 billion riyals ($150 billion) at the end of the first quarter. Still, last week QNB completed acquisition of Turkey’s Finansbank, which could keep it ahead.
Due diligence for a merger could take six months and full integration a further 12 to 18 months, EFG Hermes said in a research note.
It said FGB would probably be absorbed into NBAD which had a larger asset base, or the two might become subsidiaries of a new holding company — a model used in neighboring Dubai in 2007 when Emirates Bank International and National Bank of Dubai combined to form Emirates NBD, Dubai’s biggest bank.
NBAD, known for its strong wholesale banking operations, reported a 10.7 percent year-on-year fall in net profit to AED1.27 billion in the three months to March 31, while FGB, which is strong in consumer lending, reported a 6 percent fall to AED1.33 billion.
NBAD had a Tier 1 capital ratio of 15.1 percent on March 31 with FGB’s ratio at 16.9 percent — both well above the UAE regulator’s requirement of 8 percent.
Chiradeep Ghosh, senior analyst at SICO in Bahrain, said news of the merger talks was surprising.
“The two banks have contrasting business models and different operating styles, strategy and philosophy,” he said.


Emirates trims Boeing shopping list amid 777X delays

Updated 20 November 2019

Emirates trims Boeing shopping list amid 777X delays

  • The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion
  • But Emirates’s purchases overhaul reduces the order to 30 planes

DUBAI: Emirates Airline on Wednesday slimmed down its purchasing plans with Boeing amid delays in delivering an order of 156 of the new long-range 777X aircraft, substituting instead 30 of its 787-9 Dreamliners.
The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion, but the overhaul reduces that to 30.
At the same time, Emirates is cutting its 156-strong order of the larger 777X to 126 planes.
The restructuring means that the carrier now has just 156 aircraft ordered from Boeing, compared to 196 previously in both firm orders and initial agreements, an airline spokeswoman confirmed to AFP.
“Emirates reduced its 777X order of 156 to 126 and substituted them with the Dreamliners,” Emirates president Tim Clark told a news conference at the Dubai Airshow.
Boeing said the airline will update its order book “by exercising substitution rights and converting 30 777 airplanes into 30 787-9s.”
Emirates said in a statement that for the 777X, it “will enter into discussions with Boeing over the next few weeks on the status of deliveries.”
Emirates in 2013 signed a $76-billion contract for 150 Boeing 777X twin-engine aircraft, powered by GE’s new GE9X engine, in what was the single largest order by value in the history of US commercial aviation.
The order was subsequently increased to 156 planes.
The 777X was originally scheduled to take off on its first test flight this summer, however its development has been slowed by issues with the engine and Boeing has pushed back the timeframe to early 2021.
The delays also hit as Boeing is in the process of completing changes required by regulators on the 737 MAX, which has been grounded worldwide after two crashes that resulted in 346 deaths.