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ABU DHABI – In April, First Abu Dhabi Bank (FAB) called off a $1 billion deal to buy Egypt’s largest investment bank. Just a few months later, it’s aiming even higher.
FAB, which has grown into the Middle East’s largest bank by assets since it was created through a merger about six years ago, said on Thursday (Jan 5) that it was studying a takeover bid for Standard Chartered, but it is no longer considering a takeover bid for Standard Chartered. Takeover offer from London-based lender.
If the deal goes through, the regional champion would catapult the regional champion into an emerging-market banking giant with assets of more than $1 trillion — roughly one-third the size of HSBC Holdings — and would be the biggest overseas acquisition by a Gulf company.
FAB’s quest for Standard Chartered highlights the growing ambitions of Middle Eastern banks and the rich oil states that back them. It also demonstrates Abu Dhabi’s desire to play a bigger role on the international stage and marks a turning point in the two-year tenure of chief executive Hana Al Rostamani.
“FAB’s consideration of merging with an international bank of Standard Chartered’s size demonstrates the ambitions of the Abu Dhabi company to expand its financial services into new geographic regions,” said Abu Dhabi-based Mohammad Ali Yassin, independent Capital market advisors and investors. The interest also “emphasizes its thought process of seeking to grow exponentially rather than gradually across the scale of local and regional competition”.
FAB shares closed down 2.3 percent on Friday, with a market capitalization of $50.2 billion, about twice that of Standard Chartered.
Any deal would be complex and ambitious given the difference in size and scale of the two banks, but FAB has the backing of some of the world’s largest investors, which it may need to turn to to get the deal done.
“Acquisitions are out of the question with the current balance sheet,” said Shabbir Malik, analyst for UAE and Saudi financial research at EFG-Hermes in Dubai. “They’re going to have to do a rights issue, and the major shareholders, Mubadala and the ruling family of Abu Dhabi, will have to get involved.”
Abu Dhabi, which manages more than $1 trillion in sovereign wealth, is home to funds including ADQ, Abu Dhabi Investment Authority and Mubadala Investment, which owns about half of FAB, as well as the emirate’s ruling Al Nahyan family , the family is the richest in the world with a US$300 billion fortune.
Spurred by cash from last year’s commodities boom and equally ambitious neighbors such as Qatar and Saudi Arabia, the United Arab Emirates – which holds 6% of the world’s proven oil reserves – is investing billions of dollars to diversify its economy . from crude oil.
At the heart of these ambitions is Sheikh Tahnoon bin Zayed Al Nahyan, a powerful royal and FAB chairman. In recent years, Sheikh Tahnoon has taken a more prominent role in leading the emirate’s political and economic agenda. He is also head of the Royal Group and ADQ, which oversees many of Abu Dhabi’s key assets, such as the port and the local stock exchange.
FAB was created when Abu Dhabi merged its two largest banks, National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB), in 2016. The main purpose of the new entity is to drive economic growth in the UAE by providing loans to state-owned entities and the domestic private sector. FGB is primarily focused on consumer banking and credit cards, while NBAD is bigger in wholesale banking and has expanded internationally under the leadership of a chief executive who spent 20 years at Standard Chartered.
In recent years, FAB has built a lucrative investment banking business, amassing about $312 billion in assets as of the end of September. That compares with Standard Chartered’s $864 billion. The lender also benefits from close links with the Abu Dhabi government, with state-owned and public sector companies holding large accounts at the bank.
About three-quarters of FAB’s revenue comes from the UAE, according to an investor presentation in November, although the bank operates in 19 countries outside its home market. The bank, which employs about 7,000 people and generates about 43 percent of its revenue from investment banking, was involved in several high-profile deals in the Gulf region last year in a string of dealmaking and initial public offerings.
FAB acquired the Egyptian arm of Audi Bank in 2021 but has not yet made any other major acquisitions. Last year, it withdrew its billion-dollar takeover of investment bank EFG-Hermes after Egypt faced lengthy regulatory delays.
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