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Aden - Yasmine El Tohamy - Shareholders of Dubai Islamic Bank (DIB) on Wednesday approved the acquisition of its smaller Shariah-compliant rival, Noor Bank, creating one of the world's largest Islamic banks globally with Dh280 billion in assets.
In addition to positioning Dubai as a major capital of Islamic economy, the merger will also enable the Shariah-compliant bank to compete better at the global level.
As competition bites bottomline in a slowing economy and with low oil prices, banks in the UAE are in a consolidation mode to improve profitability. A Bloomberg reported had earlier said that the UAE leads the GCC banking sector with the highest number of mergers both in terms of value and volume. Currently, six mergers and acquisitions are being negotiated or underway in the UAE banking sector worth $625.25 billion, followed by two M&As in Saudi Arabia worth $256 billion, and one each in Kuwait and Oman, it said in May 2019.
Shareholders also approved increasing DIB's capital from 6.589 billion shares to 7.24 billion in line with the approved share swap ratio of one new share in DIB for every 5.49 Noor Bank shares. This translates into an issuance of 651.15 million new shares.
In November 2018, DIB's board had approved the proposed terms of acquisition of Noor Bank. Sovereign wealth fund, Investment Corporation of Dubai, holds a stake in both the banks -28.37 per cent in DIB and 22.85 per cent in Noor Bank.
"DIB is now the UAE's biggest Islamic lender with Dh230 billion assets as of September 30, 2019 and, with the acquisition of Noor Bank, we are on track to expand our footprint in the region and beyond. Completion of this deal will provide opportunities for economic growth, ensuring that the UAE's financial sector remains at the forefront of the Islamic economy," said Mohammed Al Shaibani, chairman of Dubai Islamic Bank.
"We are confident that this acquisition will build upon the already strong foundations we have established and accelerate our growth in the sector. With a strong track record and a robust platform, the future can only be positive with the additional scale and reach that we will gain as a consequence of this deal," said Adnan Chilwan, group CEO of Dubai Islamic Bank.
He said that the acquisition will generate significant synergies, leading to improved efficiencies and greater contribution to profitability with a positive impact on shareholder returns.
Total assets of Islamic banks in the UAE stood at Dh565.7 billion at the end of September 2019, a drop of 2.3 per cent year-on-year. This is compared to Dh2.45 trillion assets of conventional banks, which grew by 8.8 per cent year-on-year, the Central Bank said in its third-quarter 2019 report.
DIB shares gained 1.56 per cent to close at Dh1.30 on Wednesday. DIB's first nine-month net profit increased to Dh4 billion as compared to Dh3.7 billion for the same period last year, up eight per cent.
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