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Abu Dhabi considering more bank mergers

|By Arabian Post Staff|Abu Dhabi is considering more mergers to boost its financial services industry after combining National Bank of Abu Dhabi and First Gulf Bank, Bloomberg reported quoting some people with knowledge of the matter.

The agency said Abu Dhabi is weighing a plan to merge Abu Dhabi Commercial Bank PJSC and Union National Bank and also combine Abu Dhabi Islamic Bank with Al-Hilal Bank. But further deals are expected only after the NBAD-FGB merger is completed by March 2017Abu Dhabi decided to combine its two largest banks in July to create a regional powerhouse with $175 billion of assets.

The merger was seen as a precursor to more deals in the United Arab Emirates’ financial services industry, where about 50 lenders compete in a market of about 9 million people. The emirate has also announced plans to combine two of its largest sovereign investment funds: International Petroleum Investment Co. and Mubadala Development Company, as well as mergers in industries from oil to education, Bloomberg pointed out.

Abu Dhabi Investment Council, a sovereign wealth fund in the emirate, owns a 58 percent stake in ADCB and 50 percent of UNB, according to data compiled by Bloomberg. The fund also holds a 7.6 percent stake in Abu Dhabi Islamic Bank and a holding in Al-Hilal.

The Abu Dhabi Securities Market Banks Index, comprised of 14 banking and financial services companies on the Abu Dhabi exchange, has fallen about 9 percent this year. Banks, like other industries in the region, are under pressure as the drop in oil prices has stifled Middle Eastern economies. ADCB’s third-quarter profit fell 17 percent from a year earlier as its impairment allowances jumped, the company said last month.

The case for a merger between Abu Dhabi Commercial Bank and Union National Bank became stronger after recent combinations in the U.A.E., investment bank Arqaam Capital said in a research report last month. ADCB which has a market value of about $8.6 billion, has $69 billion in assets, while UNB with a market value of $2.9 billion, has $29 billion in assets, the report said.