x Abu Dhabi, UAEWednesday 17 January 2018

ADCB in discussions over acquisition of RBS assets

Abu Dhabi bank eyes UK lender's branches across the region

Abu Dhabi Commercial Bank (ADCB), the emirate's second largest by assets, is in talks to buy the local retail business of Royal Bank of Scotland (RBS). ADCB, which plays a key role in Abu Dhabi's infrastructure financing and has close ties to the Government, said it was not known whether the talks would lead to the acquisition of RBS's assets, which have also interested other local lenders.

"No definitive agreement has been reached at this juncture," Ala'a Eraiqat, the chief executive of ADCB, wrote in a statement to the Abu Dhabi Securities Exchange. Analysts expect RBS's retail assets in the UAE to fetch about US$280 million (Dh1.02 billion). "We will of course update the market as and when appropriate, however it would not be appropriate to comment during the sales process," said a spokesman for RBS.

Emirates NBD, the UAE's largest bank by assets, has also been in talks with RBS. Mashreqbank is also believed to be interested in acquiring the assets. Last year, RBS pledged to reduce its balance sheet as part of a strategic plan. The bank, which is majority owned by the UK government, is leaving several businesses across the globe where it is not a market leader. It has been active in the UAE since 1998.

Local banks have been building up their branch networks in recent years. Buying RBS's assets, which include three branches in the UAE, would allow a new owner to boost the size of its retail customers and assets in one go. "RBS has functioning branches with existing customers and a decent amount of assets," said Deepak Tolani, an analyst at Al Mal Capital. "So somebody like ADCB might just as well take them on. It is an easy and relatively quick way to ramp up the loans."

RBS declined to disclose the value of its assets, which include branches in Dubai, Sharjah and Abu Dhabi. The UAE is considered heavily overbanked, although lenders are still trying to expand their footholds in the retail banking arena. ADCB has more than 40 branches across the country. It had about Dh37bn in retail loans on its books at the end of last year, Dh4bn in cash and Dh8.3bn in loans coming due this year. That is slightly more than a quarter of its overall debt.

RBS's wealth management activities also make an interesting target for local banks. Most regional banks have seen their interest income decline sharply after the financial crisis dried up liquidity and made it more expensive to raise new money. As a result, many banks, including ADCB, have pledged to diversify their activities, such as building up their wealth and asset management. The Central Bank has not given any full commercial banking licences for many years. But banks without a licence have been excluded from the bidding process.