Commercial Bank of Dubai responds to reports of merger

Commercial Bank of Dubai (CBD) has dismissed reports regarding plans for a merger or acquisition, saying the lender was sticking to its strategy.

“With regard to various media reports, the board of Commercial Bank of Dubai would to like to clarify that there are no discussions whatsoever concerning mergers, acquisitions or activities of a similar nature,” the bank said in a bourse statement on Wednesday.

“The board and management are fully committed to successful execution of the approved strategy which has resulted in strong results over 2018 and the first quarter of this year,” it added.

Last month, CBD reported a 21.5 per cent rise in first quarter net profit to reach Dhs340.05m, on the back of higher income and lower costs.

The bank’s operating income for Q1 amounted to Dhs774m, an increase of 17.6 per cent while operating expenses fell 3.7 per cent to Dhs206m.

The UAE’s banking sector has seen a rise in the mergers and acquisitions in the last few years due to saturation in the sector.

Earlier this month, Abu Dhabi Commercial Bank (ADCB) officially merged with Union National Bank (UNB) and the combined entity acquired Al Hilal Bank to create a lender with Dhs423bn ($115bn) in assets.

Read: Abu Dhabi banks ADCB, UNB and Al Hilal merge to create third largest UAE lender

That followed the combination of National Bank of Abu Dhabi and First Gulf Bank in 2017 to create a lender with $175bn of assets.

Looking ahead, the UAE could see some more consolidation considering overcapacity in the market – 49 commercial banks serve a population of about nine million.

However, in a report earlier this week, ratings agency S&P opined that the cycle of bank mergers in the GCC region over the past 24 months is “coming to an end”.

“Some market observers attribute the renewed interest in mergers by banks in the GCC to the less supportive economic conditions since second-half 2014, when oil prices started to drop,” said S&P Global Ratings credit analyst Mohamed Damak.

“We believe the reason is the desire to further enhance efficiency, strengthen franchises, and boost pricing power among banks with the same major shareholders.”

Most mergers and acquisitions (M&A) to date have involved banks with common major shareholders.

“As such, the pool of banks with similar ownership is smaller, which will mean fewer M&A from now on–unless economic reasons force the issue,” Damak added.