Abu Dhabi’s StanChart Interest Showcases Global Ambitions

(Bloomberg) — In April, First Abu Dhabi Bank (PJSC) signed a $1 billion deal to acquire Egypt’s largest investment bank. Just a few months later, that goal was much higher.

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FAB has grown to become the Middle East’s largest bank by assets since it was founded in a merger about six years ago. lender.

If the deal goes well, the regional champion will become an emerging market banking giant with more than $1 trillion in assets, about a third of HSBC Holdings Plc, making it the largest overseas acquisition by a Gulf company. I guess.

The FAB’s Standard Chartered survey highlights the growing ambition of Middle Eastern lenders and the wealthy oil-rich nations that back them. It also showed Abu Dhabi’s desire to play a bigger role on the international stage, and would have been a turning point in Chief Executive Hana Al Rostamani’s two-year reign.

“The fact that FAB is considering a merger with an international bank the size of Standard Chartered demonstrates the ambition of Abu Dhabi to expand its financial services reach into new geographic territories. and investors, and this interest “underlines a thought process that seeks to grow exponentially rather than scale incrementally with local and regional competition.”

FAB shares fell 2.3% on Friday, giving lenders a market value of $50.2 billion. This is about double that of Standard Chartered.

deep pocket

Any deal would have been complex and ambitious given the size and scale of the two banks, but FAB is backed by some of the world’s largest investors and will need to rely on it to complete the deal. There may have been

“The acquisition would not have been possible with the current balance sheet,” said Shabir Malik, a Dubai-based research analyst covering EFG-Hermes’ UAE and Saudi finances. “They would have had to file a rights issue, and the ruling families of Mubadala and Abu Dhabi, the main shareholders, would have had to participate.”

Abu Dhabi manages over $1 trillion in government assets and is home to funds such as ADQ, Abu Dhabi Investment Authority and Mubadala Investment Company. $300 billion fortune.

Buoyed by cash from last year’s commodity boom and boosted by equally ambitious neighbors such as Qatar and Saudi Arabia, the United Arab Emirates holds about 6% of the world’s proven oil reserves. We invest billions of dollars to diversify our economy. rough.

At the center of these ambitions is Sheikh Tahnoon bin Zayed Al Nahyan, a powerful royal family member and chairman of the FAB. In recent years, Sheikh Thanoon has taken on a more prominent role in spearheading the emirate’s political and economic agenda. He is also head of Royal Group and ADQ, which oversees many of Abu Dhabi’s key assets, including the port and the local stock exchange.

economic growth

FAB was created in 2016 when Abu Dhabi merged its two largest lenders, Abu Dhabi National Bank PJSC and First Gulf Bank PJSC. The main purpose of the new organization was to promote economic growth in the UAE by financing state-owned organizations and the domestic private sector. While FGB was primarily focused on consumer banking and credit cards, NBAD was larger in wholesale banking and Standard under his Chartered expanded internationally under his CEO, where he served for 20 years. was

In recent years, FAB has built a lucrative investment banking business, amassing approximately $312 billion in assets at the end of September. That compares to his $864 billion in Standard Chartered. Lenders also benefit from close ties with the Abu Dhabi government, with state-owned and public sector companies maintaining large accounts with banks.

About three-quarters of FAB’s revenue comes from the UAE, but the bank is present in 19 countries outside its home market, according to a November investor presentation. The lender, which employs about 7,000 staff, derives about 43% of its revenues from investment banks, and had several high-profile deals in the Gulf last year in a flurry of deals and initial public offerings. I worked on it.

FAB acquired Bank Audi’s Egyptian division in 2021, but has made no other significant acquisitions. Last year, it withdrew its $1 billion bid for investment bank EFG-Hermes after facing lengthy regulatory delays in Egypt.

“The key takeaway is that FAB is very keen on inorganic expansion and is willing to do it on a large scale given the right opportunity,” said Malik. “It would have been a daunting task for FAB management to first raise money and then spend bandwidth to face operational challenges.”

Female CEO

A George Washington University alumnus, Rostamani took over as Group Chief Executive Officer in January 2021, making her one of the few female CEOs in the banking industry, both locally and globally.

Since then, FAB has embarked on a major management overhaul that has resulted in the resignation of several executives. His Chief Financial Officer, James Burdett, recently announced that he is retiring.

At the FAB’s third-quarter earnings call in October, Rostamani said there was a risk of recession in several economies and that the tough global backdrop was “cautionary.”

“As we weather these headwinds, we are confident in the region’s resilience and have positioned it as a very good driver of economic growth and diversification in the region, while also delivering market-leading shareholder returns. We remain in a position,” she said.

international growth

Regionally, FAB has long competed with Qatar National Bank for the position of the Middle East’s largest lender. Both banks have indicated their intention to grow internationally, but such expansion has so far been limited to domestic markets and regional countries such as Turkey and Egypt.

Gulf-based lenders are starting to look further ahead. Saudi National Bank has become one of the largest shareholders of Credit Suisse Group AG following an investment late last year.

European banks like Standard Chartered have long been accustomed to backing wealthy Middle Eastern investors. Credit Suisse already counts Saudi conglomerates Olayan Group and Qatar Investment Authority among its top investors. Some of the regional funds stepped in during the 2008 financial crisis to invest billions in lenders such as Barclays, Credit Suisse and Citigroup.

For FAB, Thursday’s statement means it will preclude making offers to Standard Chartered for the next six months, except in certain circumstances, such as when a third party announces firm intentions to make an offer. .

Yassin says it makes sense for the Abu Dhabi lender to hold out another ambitious deal.

“The market would benefit much more in the future if such a deal were to take place, rather than seeing local mergers in the UAE that do not enjoy FAB growth benefits as much as international ones,” he said. He said.

–With help from Farah Elbahrawy.

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