Abu Dhabi Commercial Bank has agreed to buy the local consumer business of the Royal Bank of Scotland (RBS) for US$100 million (Dh367.2m). The deal, which will double Abu Dhabi Commercial Bank's (ADCB) credit card business, represents the first acquisition of a foreign bank's retail banking franchise in the UAE.
The stock of the country's third-largest bank by assets rose by almost 2 per cent yesterday ahead of the announcement. ADCB is listed on the Abu Dhabi Securities Exchange. "This was a vigorous process and after detailed due diligence ADCB was the preferred bidder, particularly in terms of its ability to effectively integrate and execute the transaction," said Ala'a Eraiqat, the chief executive of ADCB.
"We are delighted to welcome RBS UAE retail banking employees and over 250,000 RBS retail banking customers to the ADCB family. The biggest impact is on our credit card portfolio." Mr Eraiqat added the deal would "not have a significant effect" on the bank's loan-to-deposit ratio. ADCB had long been rumoured to be a suitor for RBS's retail operations, which include three branches and an ATM network.
The bank last month confirmed it was in talks to take them over as RBS, the UK's largest government-owned bank, offloads foreign assets as part of a restructuring plan formulated last year. RBS had three branches in the UAE, according to a Central Bank report from February, including one each in Abu Dhabi, Sharjah and Dubai. It also had 51 cash machines, two customer service centres and an operations and call centre in Dubai. Those facilities add to ADCB's existing network of 175 cash machines and 49 branches, according to a statement from the bank.
RBS also yesterday said it would sell its Pakistani arm for 41m (Dh185.6m) to a local lender. Faysal Bank, based in Karachi, will acquire 99.37 per cent of RBS Pakistan. ADCB, Emirates NBD and Mashreqbank were said to be bidding for RBS's retail business in the UAE in late March. While it is selling its retail arm, RBS will keep its wealth management and private banking businesses in the country. RBS's presence increased in 2007 when it led a consortium of banks that acquired the Dutch bank ABN AMRO in what was then the largest bank merger in history. ABN AMRO branches in the UAE were rebranded as RBS branches in February this year.
ADCB is about 65 per cent owned by the Abu Dhabi Investment Council (ADIC), a government-owned body that holds stakes in numerous local companies and a few international ones. ADIC bought a 75 per cent stake in New York's famous Chrysler Building in 2008. ADCB and RBS are part of a seven-member panel of banks that led negotiations with Dubai World over a $23.5 billion debt restructuring.
Last month, the Dubai Government-owned conglomerate announced it had reached an agreement with its core group of lenders on the restructuring, which analysts say could result in large losses on loans and put additional strains on local banks as they continue to cope with a rise in defaults. According to a JPMorgan report released on Tuesday, lenders could lose as much as 56 per cent on their Dubai World loans.
Another report from Moody's Investors Service this week said the outlook for the UAE's banks this year was "negative", in part because of Dubai World's restructuring. In January Mr Eraiqat said the bank had about Dh9bn in exposures to Dubai World. @Email:email@example.com