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02 March 2024

ADCB announces combined bank's new board

By Wam

The Abu Dhabi Commercial Bank, ADCB, has reported to the Abu Dhabi Securities Exchange the final list of names of the new board and management of the combined bank, who will assume their new roles when the merger of the ADCB, Union National Bank and Al Hilal Bank becomes effective.

This follows the confirmation that the merger is likely to be effective from May 1. The dates will still depend on a range of factors, including the results of the shareholder meetings held by ADCB and UNB, the banks said in a joint circular posted to the Abu Dhabi Securities Exchange website.

The decisions come after boards of both banks agreed to the proposed merger, following which ADCB will acquire Abu Dhabi’s Al Hilal Bank. UNB will also be dissolved, after its assets and liabilities are assumed by ADCB.

A joint letter from the chairmen of ADCB and UNB said the two banks believe the merged entity is "well positioned to provide support for UAE’s economic vision, and to actively participate in the country’s growth and diversification."

The chairmen urged shareholders to vote in favour of the merger at the upcoming meetings. "The combined bank’s increased productivity and economies of scale will contribute to greater profitability and allow the combined bank to be highly competitive in its offerings to corporate and individual customers, in both conventional and Islamic banking," the chairmen said in the joint letter.

The banks in last September announced they had commenced discussions regarding the possibility of a merger. In late January, they said their boards had voted unanimously in favour of the deal, which will create the third largest bank in the UAE.

The transaction will create a robust platform to grow the bank’s consumer and wholesale businesses in both conventional and Islamic banking. The bank’s strategic objective will be to increase market On the effective date of the merger, UNB shares will be delisted from the Abu Dhabi Securities Exchange. The combined bank will retain ADCB’s legal registrations.

The combined bank will benefit from a strong balance sheet, solid financial metrics, and favourable access to capital markets. Its capital position will comfortably exceed Basel III regulatory requirements.

The combined bank’s funding profile will be diverse, with pro forma customer deposits accounting for 75 percent of total funding, including a strong low-cost CASA (current account savings account) base of AED96 billion, and wholesale funding making up 18 percent of total funding as of 30th September 2018. The bank will also have a healthy pro forma net loan-to-deposit ratio of 96.5 percent as of 30 September 2018.

The bank’s profitability metrics will be strong, with a pro forma cost-to-income ratio of 36.0 percent, with significant potential for improvement thanks to substantial cost saving opportunities and expected double-digit returns on average equity. The pro forma net interest margin of the combined bank is three percent.

The combined bank will have a well-diversified business and customer portfolio. Corporate gross loans will represent 75 percent of the total loan book, while consumer banking loans will account for 25 percent as of 30th September 2018.

The combined bank will embrace new opportunities created by the diversifying UAE economy, gaining market share by providing an excellent customer experience, while maintaining a selective international presence.

As the second largest retail lender in the UAE, the combined bank’s consumer business will provide an extended suite of market-leading products and services, backed by an approach that emphasises simplicity, convenience and high-quality service through digital channels and an extensive branch network.

The new banking group will operate the third largest Islamic banking franchise in the UAE, with a 13 percent market share. Islamic banking customers will benefit from a distinctive offering with a wide range of Shari’ah-compliant products and services.

A stronger and expanded balance sheet will also provide greater scope for financing large and growing corporate clients. The consolidation of the corporate and SME client base of the three banks will open up opportunities for cross-selling and for broadening relationships across sophisticated offerings, from structured finance to transaction banking and treasury services. The combined bank will benefit from a state-of-the-art cash management platform, which will reinforce its capacity to attract CASA deposits.

Robust governance will be central to the creation of sustainable value for all stakeholders, and the bank will be driven by a disciplined approach to pricing risk and to managing exposure and concentration.

The combined bank will offer a platform for growth of exceptional talent, providing exciting opportunities within a high-performance environment and embedding the culture of putting customers first.

The transaction provides scope for investing further in capability-building programmes and development of the highly diverse employee base. The bank’s aim is to contribute to the UAE’s role as a centre of excellence in financial services by actively encouraging UAE nationals to pursue careers in the sector and facilitating the training and professional development needed for success.

The merged entity is expected to own AED423 billion in assets, with total deposits valued at AED285bn.