Here’s a look at new banking giant expected from NCB-Samba merger

The Saudi Central Bank (SAMA) and the General Authority for Competition (GAC) recently approved the merger of the National Commercial Bank (NCB) and Samba Financial Group (Samba), whereby the latter will merge with the former, transferring all its assets and liabilities to NCB.
 

The merger is expected to be completed in H1 2021 under the proposed name - Saudi National Bank.
 

In October 2020, NCB entered into a legally binding merger agreement with Samba, under which both banks agreed to take the necessary measures to implement a merger pursuant to the Companies Law, as well as the merger and acquisition regulations issued by the capital market authority, Argaam reported.
 

Shareholders of Samba Group will acquire new shares in NCB, as per the exchange ratio of 0.739 shares in NCB for every Samba share.

On completion of the merger, NCB’s existing shareholders will own 67.4% and Samba’s shareholders will own 32.6% of the merged bank.
 

NCB is the largest Saudi bank in terms of assets, and it is considered the first Saudi bank to kick off its activities under the Royal decree issued in December 1953.
 

In 1997, NCB was converted into a joint stock company, and in 1999 the Saudi government -represented by the Public Investment Fund (PIF), acquired a majority shareholding in the bank’s ownership, while the remaining shares were divided between the General Organization for Social Insurance and a number of Saudi investors.
 

In 2014, the bank offered 25% of its shares for public subscription and it debuted on the Saudi Stock Exchange (Tadawul) in November of the same year.
 

Meanwhile, Samba Financial Group is considered the fourth largest Saudi bank in terms of assets. It was established by a Royal decree issued in February 1980.
 

In 1999, Samba Financial Group merged with the United Saudi Bank. Samba has branches across all parts of the Kingdom, in addition to its branches in Pakistan, Dubai and Qatar.

The Public Investment Fund is the largest owner in both NCB and Samba.

The following table illustrates the key financial data of both banks:

*As per SAMA’s data 

** As per 2019 information 
 

The merger will enable the shareholders to own stakes in the Kingdom’s largest bank as follows:

Under the merger agreement, the merging bank will be the Kingdom’s biggest lender, accounting for almost 25% of the retail and commercial banking sectors with total assets of SAR 896 billion.

The new entity is expected to offer diversified and integrated banking services, along with a solid balance sheet to support growth plans. It will also offer balanced business profile with high liquidity and strong balance sheet, with a loan-to-deposit ratio of 81%.

This will help the two banks expand the scope of their business, in a manner that enhances the competitiveness of the new entity to be the largest institutional financer in the Kingdom and one of the largest banks in terms of retail banking services.

On completion of the merger, NCB’s existing shareholders will own 67.4% and Samba’s shareholders will own 32.6% of the merged bank.
 

According to the financial data of the two banks for the first 9 months, 2020, the new bank’s operating income will reach SAR 22.96 billion, 39.6% of which will be from the retail segment, 25.76% from the global markets and treasury segment, and 23.67% from the corporate segment.
 

The following table illustrates the key financial data of both banks: 

The two banks have an overall number of branches reaching 504, representing 25% of the total branches of Saudi banks in the Kingdom.

*According to SAMA data
 

Under the merger agreement, the new bank is expected to boost its cross-selling capabilities, as well as adopt an enhanced operating model, and strengthen the portfolios of both banks.
 

The new entity will aim to support Saudi companies that seek more expansions, as it will be the largest institutional financer in the Kingdom. It will also support major transactions and projects in the Kingdom.
 

For More M&As