UAE banks downplay merger talks

MERGER DOWNPLAYED: ADCB and NBAD described the reports as just 'rumour'. (ITP Images)

Executives at major United Arab Emirates banks downplayed speculation on Sunday that big mergers were imminent after shares in Abu Dhabi Commercial Bank (ADCB) and National Bank of Abu Dhabi (NBAD) soared.

Long-standing pressure on Gulf banks to consolidate amid growing competition from international players is expected to increase as tensions from the credit crisis sweep the booming Gulf Arab region.

Gulf Arab banks have already tightened lending as interbank borrowing costs mount, in a move expected to erode profits.

"We discussed [the rumours] at our management meeting and we received no instructions from the board or the higher authorities," NBAD's Chief Operating Officer (COO) Abdullah Salah Abdul Rahim told newswire Reuters.

"We have no information at all about a merger."

NBAD shares were up 3.93 percent at 0924 GMT with ADCB up 9.9 percent.

Market participants said consolidation rumours intensified last week after the central bank of the United Arab Emirates launched a 50 billion-dirham ($13.61 billion) emergency lending facility to ease tensions in the interbank market.

"There are some rumours in the market that the Abu Dhabi market will witness some mergers and acquisitions in the banking and real estate sectors," said Ahmed Hamdy, senior relationship manager at Prime Emirates.

"ADCB is one of the banks likely to be involved," he said.

But ADCB chief executive Eirvin Knox downplayed the import of the market talk. "There are lots of rumours. That is all," he told newswire Reuters.

"I have no information on this. I am not aware of anything that is happening," Knox said.

Faced with growing competition from global players, lenders in the world's biggest oil-exporting region have already been consolidating to help them better compete and diversify revenues.

Emirates NBD, the largest Gulf Arab lender by assets, was formed last year in an $11.3 billion merger between Emirates Bank International and National Bank of Dubai, which like ADCB, were part-owned by the government.

The merger was brokered by the government, which has been pushing for more consolidation in the financial sector.

Some 45 banks operate in the UAE, a country of around 4.5 million. (Reuters)

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