Abu Dhabi’s ADCB, Union, Al Hilal Bank in talks to merge

If successful a deal could be announced as early as this month, Bloomberg said

Abu Dhabi is exploring the potential merger of three of its banks to create a lender with around $110bn of assets.

Bloomberg first cited sources as confirming discussions to combine Abu Dhabi Commercial Bank (ADCB), Union National Bank and Al Hilal Bank.

If successful a deal could be announced as early as this month, the sources said, emphasising that a final decision has yet to be made.

ADCB then issued a statement confirming it was in “exploratory talks regarding a potential merger with Union National Bank” and had begun “similar and separate” discussions with Al Hilal.

“Both sets of discussions are currently at a very preliminary stage and may not result in a transaction,” it said, adding it would update the market of any developments.

Union issued a similar statement confirming talks with ADCB.

ADCB shares were up 12 per cent in late morning trade on the Abu Dhabi Securities Exchange and UNB shares were up 15 per cent. Al Hilal is not listed.

The potential merger, which would create the Gulf Cooperation Council’s fifth largest bank, follows the combination of National Bank of Abu Dhabi and First Gulf Bank last year to create a lender with $175bn of assets.

Read: First Abu Dhabi Bank’s 2017 profit hit by merger costs

The UAE Banks Federation said in an annual report released last week that the sector was still ripe for consolidation given the large number of lenders serving the country’s 9.54-million population and the pursuit of cost savings.

There were 22 national banks and 27 foreign banks operating in the UAE as of December 2017, according to the federation’s report.

Read: UAE banks cut more than 600 workers, 75 branches in 2017

Abu Dhabi has also merged other government-held units over the last two years including state funds Mubadala, IPIC and Abu Dhabi Investment Council.

Read: Abu Dhabi to combine sovereign funds creating $250bn behemoth

Mubadala holds majority stakes in ADCB and Union through the Abu Dhabi Investment Council merger.

Al Hilal is fully owned by the Abu Dhabi government, according to Reuters.