Abu Dhabi banks deny merger talks, shares fall

Three Abu Dhabi banks denied they were in merger talks on Sunday, sending their share prices lower as investor hopes of a shake-up in the banking sector were dashed.

Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB) and Abu Dhabi Islamic Bank in separate statements to the bourse each denied they were involved in merger plans.

Shares in the lenders had been suspended earlier on Sunday until they responded to a Bloomberg news story published last week, an exchange source told Reuters. The story cited unnamed sources as saying the Abu Dhabi government was weighing a merger between ADCB and UNB, and another between ADIB and Al Hilal Bank. Al Hilal is not listed.

Rumours have been circulating in recent months of more possible banking tie-ups after Abu Dhabi’s two largest banks, National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB), agreed a merger that is expected to be completed in the first quarter of 2017.

Crowded with more than 50 banks, the UAE banking sector has been squeezed over the past two years by lower government spending and stricter global capital rules.

Shares in ADCB, UNB and ADIB jumped last week on renewed speculation about possible mergers.

After the release of statements by the banks, trading on their shares resumed.

Shares in ADCB closed 2.65 per cent lower at Dhs5.88, while shares in UNB fell 5.16 per cent to Dhs4.23. ADIB’s shares closed 0.83 per cent lower at Dhs3.57.

Abu Dhabi, the oil-rich capital of the United Arab Emirates, has been revamping its economy and pressing ahead with consolidating state-owned entities after two years of low oil prices that have weighed heavily on its revenues.

Aside from the NBAD-FGB merger, Abu Dhabi is pushing ahead with the merger of two sovereign funds, Mubadala Development Co and International Petroleum Investment Co (IPIC), and recently announced the merger of three of its universities.

Prior to that, Abu Dhabi National Oil Company said it was merging two of its offshore oil and gas companies.