NBAD-FGB merger credit positive, says Moody’s

The proposed merger between National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) is credit positive for both banks, Moody’s Investors Service said in a note on Monday.

NBAD’s credit profile is expected to benefit from greater business diversification and profitability, while FGB’s depositors and creditors will be transferred to NBAD, a larger and stronger entity, the ratings agency explained.

“We expect that this combination will broaden the bank’s franchise and spur organic growth,” Moody’s said. “In addition, the merger will moderate NBAD’s very high borrower concentrations, given the enlarged capital base and FGB’s more granular portfolio.”

No significant changes in FGB’s fundamental operations and standalone credit profile are expected while the merger is in process, it added.

According to initial details on the deal, the combined bank will be 52 percent owned by FGB shareholders and 48 percent by NBAD shareholders.

The new entity is expected to retain the NBAD name, and will acquire all of FGB’s liabilities and assets. The bank will likely become the largest lender in the GCC region, with approximately $170 billion in assets.

Last week, the boards of directors of both Abu Dhabi-listed lenders voted to approve the merger. The merger is expected in the first quarter of 2017 and is still subject to shareholder approval. 

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com