NBAD, FGB merger could lead to 30% cost savings

A merger between UAE lenders National Bank of Abu Dhabi and First Gulf bank could lead to cost savings of almost 30 per cent, according to a banker who oversaw the creation of Emirates NBD.

Speaking to Bloomberg TV, former Emirates NBD chief financial officer Sanjay Uppal said domestic mergers would typically target revenue synergies of between 6 and 12 per cent and cost synergies of between 15 to 28 per cent.

The banks, which confirmed they were in talks to merge on Sunday following reports last week, “should be targeting synergies somewhere close to these benchmarks”, he added.

Read: Abu Dhabi banks NBAD, FGB in early merger talks

The potential deal would create the Middle East’s largest lender by assets, at around $172bn, based on both banks’ 2015 figures. This compares to Qatar National Bank’s almost $148bn of assets reported last year.

It would also overtake the likes of Deutsche Bank, Credit Suisse and Standard Chartered with a market value near $30bn, according to the news service.

Uppal, who served as CFO when Emirates Bank and National Bank of Dubai merged to form Emirates NBD in 2007, said the two could generate cost savings through reducing head office space, administrative costs and branch networks.

The businessman, who is now CEO of financial consultant StraitsBridge Advisors, said the deal could potentially take less time than the around seven months taken by Emirates NBD as it could follow the same blueprint.

He also told Bloomberg it could lead to further consolidation in the UAE banking industry, which is widely considered to be over served with 50 local and international lenders.

Egyptian investment bank EFG Hermes said due diligence for any deal could take six months with full integration likely to take a further 12 to 18 months.

However, the bank told investors that NBAD would likely be a better fit for Abu Dhabi Commercial Bank as they both have a common shareholder in Abu Dhabi Investment Council.