Abu Dhabi Islamic Bank Said To Mull Merger Option

Abu Dhabi Islamic Bank is weighing strategic options for its business, including a potential merger, according to people with knowledge of the matter.

The UAE's second-biggest Islamic lender is in early talks with financial advisers about measures such as combining with a larger entity or buying a smaller institution, said the people, asking not to be identified as the discussions are private.

Abu Dhabi Islamic Bank would prefer to acquire another lender rather than being taken over, two of the people said. A formal process hasn’t started and talks may not result in a deal, the people said. Senior executives at Abu Dhabi Islamic Bank weren’t immediately available for comment.

Abu Dhabi, home to about 6 percent of global oil reserves, is stepping up efforts to create leaner and more competitive banks after a slump in crude prices.

Abu Dhabi Commercial Bank is in the process of merging with Union National Bank and Al Hilal Bank after a tie-up between Abu Dhabi’s two biggest banks in 2017. With about 50 lenders competing in a market of about 9 million people, smaller banks are coming under pressure.

Abu Dhabi Islamic Bank was "the only entity that was left behind in the mega mergers, and now that it is considering a merger, the options are limited," said Joice Mathew, the head of equity research at United Securities in Muscat. "The cost of regulatory compliance is also on the rise for financial institutions, and size does matter there. Consolidation could be a winning proposition for all."

Abu Dhabi Islamic Bank has about $34 billion in assets and a market value of $4.2 billion. In November, it got approval to allow foreigners to own up to 25 percent of its shares, which have gained 10 percent this year.

The bank plans to hire former Credit Agricole banker Mazin Manna to replace acting CEO Khamis Buharoon, people familiar with the plans said in December.