National Bank of Abu Dhabi to merge with First Gulf Bank
National Bank of Abu Dhabi to merge with First Gulf Bank

The National Bank of Abu Dhabi and First Gulf Bank, both based in Abu Dhabi, are planning to merger in order to create a financial giant in the region.

The proposed merger will create the largest bank in the Middle East and North Africa region with AED 642 billion or $175 billion of assets and a combined market capitalisation of approximately AED 106.9 billion or around $29.1 billion. The new entity will be a financial powerhouse and will advance the UAE's position in the global financial market.

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 new bank will be the leading financial institution in the United Arab Emirates with a 26 per cent stake of outstanding loans and will manage branches and offices in as many as 19 countries. The merger is expected to be completed in the first quarter of 2017 and banks will continue to operate as separate entities until that time.

Following the merger, the shareholders of FGB shareholders will own approximately 52 per cent of the new entity and NBAD shareholders will own approximately 48 per cent. The new bank will retain NBAD's legal registrations and the brand name of "National Bank of Abu Dhabi".

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.