DIB-Noor merger to create Dh275B Islamic banking

DIB-Noor merger to create Dh275B Islamic banking

Khaleej Times, 14 April, 2019

Dubai Islamic Bank (DIB) on Sunday confirmed that it is looking at opportunities, including acquiring other financial institutions, to support the expansion of its activities.

Responding to reports that it would be acquiring rival Noor Bank, the largest Islamic bank in the UAE clarified in a statement to the Dubai Financial Market that the expansion of its activities is “in line with the strategy and direction of its shareholders and board of directors.”

The potential acquisition could create a mega Sharia complaint bank with total assets worth Dh275 billion, according to reports.

DIB has Dh223.7 billion in total assets while Noor Bank has Dh50.7 billion in assets, giving the potential new entity total assets of Dh274.4 billion, as per their latest financial statements for 2018.

Both banks are majority owned by the Dubai government or related entities. The Investment Corporation of Dubai (ICD) owns a 28.37 per cent stake in DIB and 23 per cent in Noor Bank.

For 2018, DIB has reported an 11 per cent year-on-year increase in profits of Dh5 billion, the highest earnings reported in 2018 among its peers, while Noor Bank reported a net profit of Dh601 million. Abu Dhabi Islamic Bank recorded earning of Dh2.5 billion, up 8.7 per cent, while Emirates Islamic Bank’s profits grew 32 per cent to Dh924.26 million. Sharjah Islamic Bank and Ajman Bank reported profits of Dh510.37 million and Dh170 million, respectively.

Reports by Bloomberg said that DIB had held preliminary talks with its smaller rival Noor Bank’s shareholders, which were at the early stages.

EFG Hermes said last week that acquiring Noor Bank by DIB would be a positive move for the buyer, while further consolidation would benefit the UAE’s overcrowded banking sector.

The Egyptian investment bank said there is room for more tie-ups among local lenders as the UAE is overbanked with 22 local and 38 foreign banks, most of which have “sub-optimal” market shares.

The latest merger prospect is the latest in a spate of consolidation the UAE banking sector has been witnessing over the past few years. Abu Dhabi Commercial Bank is in the process of merging with Union National Bank and taking over Al Hilal Bank, to create the third-biggest banking entity in the country. Banks in Saudi Arabia, Kuwait and Bahrain are also holding merger talks.

Islamic banks listed on the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) registered a 13.7 per cent year-on-year profit increase in 2018. Their combined net profits surged to Dh9 billion from Dh7.93 billion in 2017, according to latest available data. Total assets of Islamic banks operating in the UAE grew 5.4 per cent to Dh474.96 billion in 2018, versus compared to Dh450.475 billion in 2017.