Saudi Arabia's Samba, NCB to complete $223bln merger in 2021

New entity will have a net income of around $1.9bln, the largest in MENA

  
Image used for illustrative purpose. A trader monitors stocks at a Saudi Bank in Dammam October 26,2008.

Image used for illustrative purpose. A trader monitors stocks at a Saudi Bank in Dammam October 26,2008.

REUTERS/Stringer

Two of Saudi Arabia’s biggest banks, Samba Financial Group and National Commercial Bank (NCB), are expected to complete the proposed merger process in the middle of next year.

The two lenders signed on Sunday an agreement to proceed with the proposal to merge, creating a banking powerhouse in the Middle East with a net income of around 7.2 billion Saudi riyals ($1.9 billion) and combined assets worth $223 billion.

According to a timeline unveiled on Wednesday, the start of integration or completion of the deal is likely to happen during the second quarter of 2021.

Once merged, the new entity will serve approximately 25 percent of the retail and wholesale banking market.

500 branches

The new “banking champion” will also have a portfolio of more than 500 branches, 4,100 ATM machines and 950 cash deposit machines spread across the kingdom.

It will also enjoy a strong liquidity profile and capital position, with its loan-to-deposit ratio estimated to be around 82 percent and combined equity base at 120 billion Saudi riyals ($32 billion).

“This merger of NCB and Samba would create a clear national champion that will transform the local banking sector and catalyse the delivery of Saudi Arabia’s Vision 2030,” said Saeed Mohammed Al-Ghamdi, chairman of NCB.

Samba announced on Wednesday that it has just launched a joint website with NCB to reveal more details about the planned merger.

Details

The merger is said to unlock approximately $213 million in annual fully-in phased in cost synergies after the integration is complete.

There is also a potential for revenue synergies between the two banks, with one-time cash integration costs expected to be around $293 million.

Shareholders are yet to vote for the merger. They will be invited to cast their votes during an Extraordinary General Meeting, following which, if the merger will be agreed by the shareholders of both banks, the two entities’ shares will be combined.

The management of both banks are in the process to obtain the CMA's final approvals on the terms of the signed agreement.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

Cleofe.maceda@refinitiv.com 

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© ZAWYA 2020

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