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Wed 16 Nov 2016 11:58 AM

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Abu Dhabi jumps on bank merger speculation, oil bounce supports region

Union National Bank, Abu Dhabi Commercial Bank rise after Bloomberg report

Abu Dhabi jumps on bank merger speculation, oil bounce supports region

Abu Dhabi's leading banks rallied early on Wednesday on renewed speculation that the government could merge banks as part of an efficiency drive, while other Gulf shares bounced in line with global stocks and after an overnight rebound in oil prices.

Abu Dhabi's Union National Bank surged 12.8 percent and Abu Dhabi Commercial Bank jumped 6.0 percent as the lenders are thought likely to be next in line to be paired.

Quoting unnamed sources, Bloomberg reported Abu Dhabi is considering more financial sector mergers after First Gulf Bank and National Bank of Abu Dhabi announced earlier this year they planned to merge in first-quarter next year. FGB shares were up 2.1 percent and NBAD shares were unchanged.

Arqaam Capital said in a note: "UNB provides an underutilized balance sheet (market share erosion, too low dividends), with the same shareholder base. ADCB has a stronger track record in value creation ... UNB continues to trade at a significant discount to book and that of ADCB."

Arqaam added that the if combined, the new entity would be the third largest player in the UAE, after the NBAD/FGB and Emirates NBD.

"It offers a better footing for ADCB to compete with the bigger players as underwriting capacity increases significantly."

Abu Dhabi Islamic Bank climbed 3.2 percent after Bloomberg said it could be merged with Al Hilal Bank, though it added No final decision had been made.

Abu Dhabi's index was up 2.2 percent after an hour of trade.

Blue chips led Dubai's main stock index 1.6 percent higher with Emaar Properties jumping 1.9 percent and telecommunication operator Du adding 2.6 percent.

Saudi Arabia's index bounced back 1.5 percent with the majority of the traded stocks gaining. Petrochemical shares were strong after Brent futures rebounded over night and were trading a little over $47 a barrel. All but one of the 14 listed oil-derivative producers were up with the largest Saudi Basic Industries adding 1.5 percent.

Banking shares, which lost their footing over the last two sessions on profit taking bounced back with bellwether National Commercial Bank rising 3.2 percent.

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