Abu Dhabi's Three-Way Merger Plan

Three banks will merge as Abu Dhabi seeks to unlock the benefits of consolidation

- Zainab Fattah, Dinesh Nair and Archana Narayanan

Abu Dhabi is engineering a second bank merger in its latest attempt to stay competitive in the era of lower oil prices.

Three of the UAE capital’s state-linked banks are in talks to combine into an institution with $110 billion of assets, according to Abu Dhabi Commercial Bank PJSC, one of the lenders. The negotiations follow a tie-up between Abu Dhabi’s two biggest banks last year and the merger of sovereign wealth funds in March.

In the latest deal, listed lenders ADCB and UNB are considering combining with privately held Al Hilal Bank to create the fifth-largest bank in the GCC. An agreement could be reached as soon as this month if talks are successful, two people with knowledge of the talks said earlier, asking not to be identified because the discussions are private.

ADCB confirmed the negotiations were under way in a statement released after Bloomberg’s initial story. It said the discussions were “currently at a very preliminary stage and may not result in a transaction.”

“This is entirely consistent with the moves over the last few years towards tighter financial control and elimination of duplicated costs in Abu Dhabi Inc.,” said Hasnain Malik, the global head of equity research and strategy at Exotix Capital in Dubai.