FGB shares to be delisted today

First Gulf Bank (FGB) shares will be delisted at close of trading today on the Abu Dhabi Exchange (ADX), as the bank makes its merger with National Bank of Abu Dhabi (NBAD) official.

Trading in shares of the combined entity will begin on April 2, with FGB shareholders receiving 1.254 NBAD shares for each FGB share held.

The new bank will carry the NBAD name, and will likely be the biggest bank in the United Arab Emirates with approximately $178 billion of assets, accounting for 27 percent of the banking sector.

When asked how the new NBAD stock is expected to trade after opening, Chiradeep Ghosh, research manager at SICO Bahrain, told Argaam he expects it to remain range-bound for the moment and then correct a bit.

“Our target price of the combined entity one year forward is AED 10.5/share. The upside for holding the stock for one year is limited, hence we have a ‘sell’ rating on the stock,” he added.

In a recently issued note, SICO said it does not expect the combined entity to be able to significantly cut operating expenses, contrary to “street expectation.”

The brokerage anticipates operating expenses to rise 4 percent year-on-year in 2017, with overheads increasing as FGB branches would have to be rebranded to NBAD.

SICO also sees higher non-performing loans going forward, “as the combined entity is likely to follow stricter risk management policy,” Ghosh said.

Meanwhile, Dubai-based Arqaam Capital is more positive about the performance of the merged entity, it said in a recent note.

“We remain optimistic about NBAD’s ability to generate high quality sustainable growth in economic profit, given its access to cheap funding, good asset quality, focus on non-funded income and cost conscientiousness,” said Jaap Meijer, managing director – research at Arqaam Capital.

The firm raised its target price for the new entity to AED 13.6 from AED 12.5 on new pro-forma forecasts, with a ‘buy’ recommendation, the report added. 

Write to Jerusha Sequeira at jerusha.s@argaamnews.com