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ALAWWAL BANK

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Saudi's Alawwal Bank and HSBC-backed SABB in merger talks

04/25/2017 | 12:45pm EDT

DUBAI (Reuters) - Saudi lenders Alawwal Bank (>> Alawwal Bank) and Saudi British Bank (>> Saudi British Bank SJSC) have agreed to start talks about a merger that could create the kingdom's third biggest bank with assets of nearly $80 billion.

DUBAI (Reuters) - Saudi lenders Alawwal Bank (>> Alawwal Bank) and Saudi British Bank (>> Saudi British Bank SJSC) have agreed to start talks about a merger that could create the kingdom's third biggest bank with assets of nearly $80 billion.

The announcement by the lenders on Tuesday is the latest example of consolidation in the Gulf's banking sector, where profit margins are being squeezed by lower government and consumer spending because of weak oil prices.

"The consolidation points to the fact that you need stronger banks to sustain in this challenging macro environment. You need large, efficient banks to serve," said Murad Ansari, an analyst at EFG-Hermes in Saudi Arabia.

British banks are the biggest shareholders in both lenders. Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) acquired a 40 percent stake in Alawwal Bank when it bought ABN AMRO in 2007. RBS has been trying sell the holding for a number of years as it retreats from international operations.

HSBC Holdings (>> HSBC Holdings plc) owns 40 percent of Saudi British Bank (SABB), which is the kingdom's sixth largest bank by assets.

A combination of Alawwal and SABB would rank third in Saudia Arabia with assets of $77.6, behind National Commercial Bank (>> National Commercial Bank SJSC) and Al Rajhi Bank (>> Al Rajhi Banking & Investment Corp SJSC), according to Thomson Reuters data.

Reuters reported in November that RBS had hired Credit Suisse to sell its stake in Saudi Hollandi Bank, which was renamed Alawwal Bank in November.

Banking sources said at the time they expected the holding to go to a local rival, partly because of restrictions on a foreign buyer taking the stake.

The banks said on Tuesday that any merger agreement would be subject to a number of conditions, including the approval of the kingdom's regulatory authorities, and said Saudi's central bank had been consulted about merger requirements beforehand.

The two lenders have several common shareholders. Saudi's Olayan family holds 21.76 percent of Alawwal Bank and 16.98 percent in SABB while the Saudi government owns 10.50 percent of Alawwal Bank and 9.74 percent of SABB, according to Thomson Reuters data.

The two banks said the proposed merger, if completed, would not result in any forced layoffs.

The announcement came the same day Citigroup (>> Citigroup Inc) obtained a licence to conduct capital markets business in Saudi Arabia, which will allow the U.S. bank to offer banking services after an absence from the kingdom of almost 13 years.

A total of 12 commercial lenders operate in the kingdom's banking sector, sharing total assets of more than 2 trillion riyals (417.5 billion pounds).

Banking consolidation is also underway elsewhere in the region. Abu Dhabi lenders First Gulf Bank (FGB) and National Bank of Abu Dhabi (>> National Bank of Abu Dhabi PJSC) (NBAD) merged on April 1 to create one of the largest banks in the Middle East and Africa.

In Qatar, Masraf Al Rayan (>> Masraf Al Rayan (Q.S.C.)) is moving ahead with a three-way merger with Barwa Bank <IPO-BABK.QA> and International Bank of Qatar.

(Editing by David Clarke)

By Tom Arnold and Saeed Azhar


© Reuters 2017
Stocks mentioned in the article
ChangeLast1st jan.
AL RAJHI BANKING AND INVESTMENT CORPORATION 1.09% 111 End-of-day quote.50.82%
BANCO SANTANDER, S.A. -1.61% 3.0875 Delayed Quote.21.65%
CITIGROUP INC. -1.00% 67.62 Delayed Quote.9.67%
CLARKE INC. 1.42% 8.6 Delayed Quote.26.95%
DOW JONES AFRICA TITANS 50 INDEX -0.30% 524.29 Delayed Quote.-0.54%
FIRST ABU DHABI BANK P.J.S.C. 1.97% 16.58 End-of-day quote.28.53%
HSBC HOLDINGS PLC -0.89% 397.45 Delayed Quote.4.91%
LETS HOLDINGS GROUP CO., LTD. -0.64% 6.18 End-of-day quote.-20.57%
LOOK HOLDINGS INCORPORATED -4.25% 1352 End-of-day quote.41.27%
MASRAF AL RAYAN (Q.P.S.C.) -1.71% 4.32 End-of-day quote.-4.64%
NATWEST GROUP PLC -1.22% 202.4 Delayed Quote.20.73%
NEXT PLC -0.35% 7882 Delayed Quote.11.23%
S&P AFRICA 40 INDEX -0.32% 169.63 Delayed Quote.-1.63%
THE SAUDI BRITISH BANK 1.82% 30.8 End-of-day quote.24.60%
THE SAUDI NATIONAL BANK 1.10% 55 End-of-day quote.26.87%
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Managers and Directors
David Robert Dew Managing Director & Director
Lubna Suliman Al-Olayan Chairman
Majed Al-Ghanemi Chief Operating Officer
Yaqoob Al-Oraini Head-Compliance
Ahmed Farid Al-Aulaqi Independent Director
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