Saudi Arabia's NCB, Riyadh Bank scrap merger talks

A merged entity of $183bln in assets no longer in pipeline

  
A man checks his mobile phone next to a screen with Saudi Stock Exchange (Tadawul) prices in Riyadh, Saudi Arabia September 16, 2019. REUTERS/Stringer

A man checks his mobile phone next to a screen with Saudi Stock Exchange (Tadawul) prices in Riyadh, Saudi Arabia September 16, 2019. REUTERS/Stringer

Saudi Arabia’s largest lender by assets, National Commercial Bank (NCB) and Riyadh Bank have announced ending the initial merger negotiations.

“The boards of directors of both banks agreed to end the initial discussions and discontinue studying the merger of the two banks,” the banks said in statement on Tadawul.

The preliminary merger talks started towards the end of last year and could have created a $183 billion worth of assets combined entity.

“The merger talks between NCB and Riyad Bank have stalled due to possible disagreements on valuation and the most likely scenario could be Riyad Bank demanding a premium,” Vijay Valecha, Chief Investment Officer, Century Financial told Zawya.

The banks however did not give a reason for ending the merger talks.

“As an entity, Riyad bank has performed really well during the past few years with net profit rising by 74 percent from SAR 3181 million in 2016 to an expected SAR 5547 million this year,” he said.

“In contrast, the net profit growth in NCB is only 12.6 percent during this three year duration. Clearly Riyad Bank has done a good job of itself and it deserves a high valuation. However, this might have been unpalatable to NCB management and the deal talks might have broken down,” he added.

The GCC region have seen a rising wave of mergers and acquisitions in the financial services industry with the aim to raise efficiencies of the sector that is seen as ‘overcrowded’.  Read more here:

(Writing by Nada Al Rifai nada.rifai@refinitiv.com, edited by Seban Scaria)

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© ZAWYA 2019

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