Native buyers monitor stocks on the day Nationwide Business Bank (NCB) listed on the Tadawul stock … [+] exchange, on November 12, 2014. (Photograph: FAYEZ NURELDINE/AFP by way of Getty Pictures)
AFP by way of Getty Pictures
Two of Saudi Arabia’s largest banks, Nationwide Business Bank (NCB) and Samba
Monetary Group, are in talks which might see NCB take over its smaller rival in a deal worth as much as $15.three billion.
The 2 banks introduced to the Saudi Stock Alternate (Tadawul) on June 25 they’d entered a framework settlement to start a reciprocal due diligence course of and negotiate the phrases of the deal.
The draft proposals launched thus far would see Samba buyers obtain newly issued shares in NCB in exchange for his or her present shares. As much as 1.54 billion new shares may very well be issued which, based mostly on the closing price of SR37.25 for every NCB share on June 24, would value the deal at SR57.four billion ($15.three billion).
NCB is already the most important bank in Saudi Arabia, with whole belongings of some $135 billion on the finish of final yr, and this deal will additional entrench its lead. Samba is the fifth largest lender within the nation, with belongings of some $68 billion. A merger would create the Gulf’s third largest bank by belongings, after Qatar Nationwide Bank and the UAE’s First Abu Dhabi Bank, in accordance with the Monetary Occasions.
The 2 Saudi lenders mentioned they hoped to conclude the method inside 4 months. Many particulars should be ironed out in that point, together with the title of the merged bank, the composition of its board and the placement of the top workplace. NCB is uncommon amongst Saudi banks in having its headquarters in Jeddah, whereas Samba relies within the capital Riyadh.
Each banks mentioned they didn’t anticipate to should make any involuntary redundancies on account of the deal.
NCB has appointed JP Morgan Saudi Arabia as its monetary advisor and Abuhimed Alsheikh & Alhagbani as its authorized advisor. Samba has appointed Morgan Stanley
Saudi Arabia as its monetary advisor and Khoshaim & Associates as its authorized advisor.
Saudi financial difficulties
The merger comes at a time when the native banking sector is being hit by the collapse of oil costs and the coronavirus pandemic. These twin crises have despatched the financial system right into a deep hunch, with the Worldwide Financial Fund forecasting a contraction of 6.8% this yr.
Rankings businesses have been highlighting the potential issues in latest months. In March, Fitch Rankings positioned all 10 Saudi banks it covers on ranking watch damaging, together with NCB and Samba. The company cited the heightened dangers of “severe and prolonged deterioration in the domestic operating environment” following the sharp fall in oil costs.
In May, rival company Moody’s
additionally modified the outlook on long-term deposit scores from secure to damaging for ten Saudi banks, pointing to a possible weakening of the federal government’s capability to supply help and a deteriorating working setting “on the back of lower oil prices, reduced government spending and spread of coronavirus.”
Different Saudi bank mergers have been mooted within the latest previous however in the end collapsed, not least NCB’s try and merge with Riyad Bank which was deserted final yr.