What does the NCB/Samba merger mean?
The National Commercial Bank (NCB), the largest and oldest bank in Saudi, announced signing a framework agreement with rival Samba Financial Group, part of the top five biggest banks in the kingdom, to explore a potential merger between the two.
Here’s what the merger would mean for the Saudi banking industry, and what are people saying.
The proposal
NCB is offering to acquire Samba for $15.6 billion, paying up to SAR 29.32 per share for Samba, at a premium of about 27.5% to last Wednesday’s closing price. Samba’s stock price surged by around 10% on Sunday after the news.
Citigroup expects a 3-6% accretion for NCB shareholders by 2023, as it upgraded Samba’s shares to buy.
The Public Investment Fund (PIF), Saudi’s sovereign wealth fund, owns 44.3% in NCB and 22.9% in Samba. The merger 'would end-up boosting the cash confers of the PIF by at least a few billions of dollars', said Ullas Ra, Assistant Professor of Finance - Edinburgh Business School.
The new bank
NCB has a market value of around $30 billion, and Samba has assets of around $214 billion.
If the acquisition takes place, the newly entity will be the third largest bank in the Middle East, with assets of around $210 billion, falling behind Qatar National Bank and First Abu Dhabi Bank, according to Bloomberg data.
‘We shall have a giant Saudi bank having the virtues of the two great lenders, and could trigger further the long-awaited consolidation in Saudi and GCC banking sector’, said Ebrahim Ebrahim, Board Member, Takaud Savings and Pensions.
NCB is looking for a new arm that would strengthen its balance sheet and complement its network of branches and customer base, said Thamer AlSaeed, Chief Investment Officer at Mad'a Investment, in a TV interview with Al Arabiya.
NCB might have "absolute control over the corporate market volumes in Saudi Arabia," Citigroup.
The merger will enhance synergies and cost reductions, giving the new entity the advantage of hold around 30% of Saudi's banking deposits, according to Bloomberg data:
The way forward
The two banks shall complete a due diligence process and sign a final agreement with the period of four months.
How will the potential merger change the Saudi banking industry? Drop your thoughts in the comments.
Senior vice president support services
4 年I am not optimistic that the deal will be materialized. But If it materialized then it will create the largest GCC bank from Equity, Earning, Operating Income and will give a chance if used to increase the operational efficiency. Finally i see more player is better for the market.
Chairman and Board Member of several joint stock companies, Chairman and member of a number of committees (executive/investment/rewards and nominations/Audit)
4 年https://twitter.com/alresalahnet/status/1276191808507215877?s=21
Chief Governance, Compliance, Legal Officer? "Ex-Banker" (GRC leader | Functions/Processes building |Change management| Board Membership)-Financial Writer ???? ???????
4 年It was a big news to merge NCB which is the biggest lender bank by assists with SAMBA which is consider one of the most successful and organized Saudi banks. Discussion will continue between both banks and will announce the final deal decision in 4 months’ time. This deal is motivated by Saudi vision 2030 to strengthen Saudi economy by creating large players in the market to be able to expand in region and globally. If the deal is materialized it will create the largest GCC bank from Equity, Earning, Operating Income and will be a new era of completion in Saudi and regional financial market. I am very optimistic that the deal will be materialized which will reduce number of banks in Saudi therefore regulator will license new banks to the market. Thanks Khalid AlGhadeer
Treasury & Risk Program
4 年This will be a welcome move for SAMBA. Saudi being the biggest market in MiddleEast should have a bank on the top three list.