National Bank of Abu Dhabi and First Gulf Bank in talks for a merger
National Bank of Abu Dhabi and First Gulf Bank in talks for a merger

National Bank of Abu Dhabi and First Gulf Bank, both based in Abu Dhabi, have confirmed that they are holding discussions for a possible merger that would create one of the largest banks in the Middle East and Africa.

Abu Dhabi's largest and third-largest lenders by assets have close links to the Abu Dhabi government and might be looking to merge to save costs. The government is looking to cut costs and restructure its assets to increase efficiency as low oil prices have impacted its revenues. The two banks said that they have separately 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.

The shares of the two banks increased after reports showed that they are in talks for a possible merger. Market experts have said that the merger could begin a wave of consolidation in the United Arab Emirates banking sector, which has more than 50 banks and is facing crunch due to lower government spending and difficult global rules.

The shares of the National Bank of Abu Dhabi rose by its 15 percent daily limit on Sunday while shares in First Gulf Bank rose 11.5 percent.