Abu Dhabi banks soar on merger talks; Gulf stock markets mostly up

Shares in Abu Dhabi banks skyrocket early on Sunday on news that National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) were in merger talks, while most other stock markets in the Gulf were firm.

NBAD and FGB confirmed in a brief statement on Sunday that they were discussing a merger or combination of their businesses, in what would create the largest bank by assets in the Middle East and Africa.

Many analysts said it was too early to take positions in the stocks before details were known. Some said a merger could benefit shareholders of both banks – Arqaam Capital said FGB would benefit from a stronger wholesale banking operation while NBAD was underepresented in retail banking – but HSBC predicted a pure merger would benefit only NBAD, while a merger through acquisition would destroy shareholder value at both banks.

“A share swap scenario presents significant dilution risks to shareholders of both banks,” HSBC said.

Nevertheless, local retail investors cheered the idea of an Abu Dhabi mega-bank, with NBAD shares jumping their 15 percent daily limit and FGB gaining 7.7 percent.

Other Abu Dhabi bank shares also rose, partly on speculation that they might be involved in further mergers and acquisitions activity as the industry consolidated. Union National Bank climbed 4.5 percent. Abu Dhabi’s main stock index added 3.3 percent.

Dubai’s index rose 0.5 percent, also supported by banks. Dubai’s largest listed lender, Emirates NBD, gained 1.7 percent.

Saudi Arabia edged up 0.4 percent in a broad-based climb. Petrochemical shares were strong after oil prices rebounded on Friday, with the sector’s index rising 0.9 percent.

But Qatar’s index index slipped 0.4 percent as declining stocks outnumbered gainers 13 to seven.

Source: Reuters