Fighting against the merger mania

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Each week Arabian Business turns the spotlight on a leading company.

Another super-merger, eh?

It appears not, actually. Abu Dhabi Commercial Bank (ADCB), the third largest UAE lender by market value, had been heavily tipped to merge with its even larger rival, National Bank of Abu Dhabi (NBAD). However, ADCB chief executive Eirvin Knox came out last week to rule out a merger for at least the next two years.

How come? I thought mergers were all the rage nowadays?

They are, but Knox is insistent that there's no truth in the rumours that a deal is imminent. "I don't think either of us need to do it. We are in different businesses, [and] serve different clients," Knox said. "There's no pressure that requires us to merge and it is not a high priority for policy makers. I don't think it will happen in the next two to three years."

Still, all that merger mania can't have been bad for business, can it?

ADCB shareholders have been laughing all the way to the bank, as the share price has soared 20% this year, largely on the back of speculation that it might merge with NBAD. This speculation hit overdrive in June, when NBAD CEO Michael Tomalin was quoted as saying that a merger would "make sense", although no specific talks were taking place. Tomalin also said that NBAD would be the acquirer.

So what's changed since then?

Analysts are unsure, although plenty are happy to hazard a guess. Although both banks are controlled by the government of Abu Dhabi, ADCB is seen as far more commercially driven and therefore aggressive. By contrast, NBAD works more closely with the local government.

I get you. So what's up next?

ADCB is mulling over the prospect of acquisitions in Turkey, the Gulf and Southeast Asia after failing last year to buy into an Egyptian lender. Interestingly, it also plans to open an Islamic unit before the end of the year.

"It is on the table and it is a high priority for us to set up an Islamic banking subsidiary," Knox revealed. "By the end of the third quarter, we will submit a business plan for approval, and we hope to get approval and then get it operational by the end of the year."

So they're moving onto bigger and better things, are they?

Indeed they are. The bank has sought approval to open branches in Qatar and Oman, and is also interested in opening a branch in the Kingdom of Saudi Arabia.

However, plans to expand its network of two branches in India - currently the bank's only foreign operations - are on hold because it has not received regulatory approval. The bank has applied to open 10 branches, but according to Knox, "the Reserve Bank of India is not currently issuing licences".

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