Moody’s Investors Service will not change the ratings of Emirates Bank International (EBI) or National Bank of Dubai (NBD) until more information about their proposed merger is available.
“It is too early to assess the outcome of these discussions and the potential impact on the banks’ ratings,” Moody’s said in a statement.
“Moody’s will await details regarding the form of the merger, the potential synergies to be derived and the challenges associated with the execution of such a transaction.”
The two Dubai-based banks are in discussions about a possible merger, subject to shareholder and regulatory approval.
In the event that the merger comes to fruition, the merged entity could become the largest bank in the United Arab Emirates, with estimated assets of AED165 billion (USD$45 billion). It would also be one the largest banks in the GCC.
Moody’s notes that a merger could give the combined banks “leading market shares in a number of business lines in the domestic market and particularly in Dubai”, adding that the government stakes in the listed companies could facilitate a merger.
“The government of Dubai, with a 77% stake in EBI and a 14% stake in NBD, appears to have been a catalyst for these discussions. Moody’s believes that the merged institution could enjoy a significantly enhanced franchise with diversified business lines, and this could have positive rating implications.”
“Moody’s adds that the banking system in the UAE is one of the most fragmented in the region. Consequently, consolidation moves are welcome as they contribute to the creation of a more competitive environment, with stronger and more diversified institutions that could play a more active role in the domestic and regional markets.”
“If this merger were to go ahead, Moody’s believes that it could be a prelude to further consolidation in the market, especially given that a number of other institutions have common shareholders.”
Emirates Bank International is currently rated A1/Prime-1/C-, with a stable outlook; and National Bank of Dubai is rated A1/Prime-1/D+, also with a stable outlook.
As at December 2006, Emirates Bank International reported total assets of AED95.9 billion (USD 26.1 billion), while National Bank of Dubai reported total assets of AED69.3 billion (USD18.9 billion).
Follow us on
