Moody’s Investors Service said that it considers the impending merger between Emirates Bank International (EBI) and National Bank of Dubai (NBD) as a very significant and positive development for both banks, and the banking industry in the
However, commenting on the recent joint statement from the two banks providing more details on the merger, Moody’s believes it is still too early to determine the outcome of the planned changes and their possible impact on the banks and their ratings.
Currently both banks have bank financial strength ratings (“BFSRs”) of C- and local and foreign currency deposit ratings of A1/Prime-1. The outlook on all ratings of both banks is ‘stable’.
Since March, the banks have announced significant preliminary details of the merger, including the creation of a holding company known as Emirates NBD (ENBD). In the
near term, EBI and NBD will operate as independent subsidiaries of ENBD under a single board and management. As the process evolves, Moody’s anticipates that, in light of the regulatory and legal requirements, the integration will come to fruition over an 18-to-24 month horizon when ENBD will emerge as an operating institution, on the platform of the merged entities.
Assuming acceptance of the offer from all the shareholders, ENBD would constitute 66% of the shareholders of EBI and 34% of the shareholders of NBD. The government of
“Moody’s believes that ENBD will benefit from a stronger franchise and capitalisation, an expanded product range, greater geographic reach and better positioning in the corporate and retail business. Going forward, the synergies expected will generate a better value proposition for the merged entity,” said Peter Carvalho, Vice President-Senior Analyst at Moody’s Middle East office, in
ENBD will have total assets of AED 165.2 bln, loans of AED102.5 bln and customer deposits of AED 95.3 bln, which translates into market shares of 19.2% of total assets, 21.7% of total loans and 18.4% of total deposits, as well as a network of 100 branches in the UAE, making it the largest bank in the UAE and the largest in the GCC in terms of total assets.
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, enabling them to play a more active role in the domestic and regional markets. Moody’s believes that this merger could be a prelude for further consolidation in the market, and a catalyst for other institutions to follow suit, especially for those that have common shareholders.
Headquartered in
