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Dubai: Trading in shares of Emirates Bank International (EBI) and National Bank of Dubai (NBD) resumed yesterday after the two banks provided further information on their merger plans to Dubai's stock exchange.
The banks told the Dubai Financial Market (DFM) they will follow the "best international practice" to complete the merger that will create the biggest banking institution in the UAE in terms of deposits, profit, assets and market capitalisation.
"The boards and management of both banks are working closely to ensure the best interest of all our shareholders, customers and employees," a joint statement by EBI chairman Ahmad Humaid Al Tayer and NBD chairman Abdullah Mohammad Saleh said.
EBI shares closed five per cent higher at Dh13.65 and NBD moved up 4.74 per cent to end at Dh14.35, boosted by the merger move.
DFM halted trading in shares of the two banks on Wednesday, citing lack of clear information on the merger announced on Tuesday.
EBI and NBD told DFM they plan to start the process of financial and legal due diligence, independent valuation, capital structuring, integration and regulatory approvals.
More information
"They have promised us more information when they have it," DFM chairman Eisa Kazim told Gulf News.
The merger exercise will be "a long one" and could take up to two years as it involves two of the largest banking institutions in the country, said Walid Shihabi, head of research at Shuaa Capital in Dubai.
The banks have not yet given any indication about the terms of their merger.
"There are a lot of considerations like whether the merger is going to be purely based on the market capitalisation of the two firms. Assets, shareholder equity, profitability are going to be important elements," Shihabi said.
Overlap of employees and branches and technology integration are seen as other major challenges.
The Dubai government, which owns 76 per cent of EBI and controls 14 per cent of NBD, will have 56 per cent share of the new, yet-unnamed bank if the ratio of market cap is used for the merger, Shihabi said.
Shuaa places the new entity at number five in the Middle East in terms of market capitalisation. Al Rajhi and Samba of Saudi Arabia, National Bank of Kuwait and Jordan's Arab Bank rank higher at their current market value.
Ratings agency Fitch sees the merger as a "welcome development for the over-banked UAE."
It said the proposed merger is credit rating neutral based on the information currently available.
The agency said it will monitor developments and will make any further rating decision in due course.
Another ratings firm, Moody's, also said it will wait for details regarding the form of the merger, the potential synergies to be derived and the challenges associated with the execution of such a transaction before its ratings pronouncement.
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