Dubai Islamic Bank, the biggest Sharia-compliant lender in the emirate, said it is looking at acquisitions among other options as part of its expansion strategy amid reports it is considering a takeover of a rival lender.
"Dubai Islamic Bank regularly looks at opportunities to support expansion of its activities, including acquiring other financial institutions," DIB said in a statement to the Dubai Financial Market, where its shares are listed. It is in line with the “strategy and the directions of its board of directors and shareholders”.
The clarification comes after the lender last week declined to comment on reports that it is planning to takeover Noor Bank. Bloomberg earlier reported that DIB had held preliminary talks with its smaller rival Noor Bank's shareholders, which were at the early stages and might not lead to a deal.
A potential acquisition of Noor Bank by DIB would create a lender with Dh275 billion in assets if completed. A Noor Bank spokeswoman said the lender does not comment on speculations.
The Investment Corporation of Dubai is the biggest shareholder in DIB with a 28.37 per cent stake, according to the bank's website. ICD also owns 22.85 per cent of Noor Bank.
Common shareholdings in financial institutions usually are the main drivers of mergers as the stakeholders strive to create leaner and more efficient entities to face challenging market conditions amid a softer economic backdrop.
Acquiring Noor Bank by DIB would be a positive move for the buyer, while further consolidation would benefit the UAE's overcrowded banking sector, Egyptian investment bank EFG Hermes said last week. There is room for more tie-ups among local lenders as the UAE is overbanked with 22 local and 38 foreign banks, most of which have "sub-optimal" market shares, it said in a report on Tuesday.
A DIB and Noor Bank union is the latest among potential merger reports as consolidation of lenders across the region gathers pace. First Abu Dhabi Bank, the UAE’s largest lender by assets, and Abu Dhabi Islamic Bank earlier this month denied reports of merger talks to create a lender with more than $236bn in assets, eclipsing all banks in the Arabian Gulf and the wider region.
In the UAE, Abu Dhabi Commercial Bank is in the process of merging with Union National Bank and taking over Al Hilal Bank, to create the third-biggest banking entity in the country. In Saudi Arabia, National Commercial Bank is pursuing its merger with Riyad Bank.
