Saudi Arabia: The largest bank merger in the Middle East and...

Saudi Arabia: The largest bank merger in the Middle East and North Africa

A binding agreement between “Al-Ahli Commercial” and “Samba Financial”, with assets of $ 223 billion


Monday – 25 Safar 1442 AH – 12 October 2020 AD Issue No. [
15294]

The two Saudi National Commercial Banks and Samba Financial for the largest bank merger in the Middle East (Reuters)

Riyadh: «Middle East»

The Saudi banking sector announced yesterday the largest banking merger in the Middle East and North Africa region, as the Saudi financial market reported the suspension of the shares of the National Commercial Bank and Samba Financial Group – one of the largest commercial banks operating in Saudi Arabia in terms of capital – to disclose a binding agreement to merge the two gigantic banks Which is expected to take place legally during the first half of next year 2021.
The National Commercial Bank said on the website of the Capital Market Company (Tadawul) – the official trading platform for the Saudi stock market – that a binding merger agreement was signed with Samba Financial Group yesterday, indicating that the two banks agreed to take the necessary steps to implement the merger deal between them in accordance with the provisions of the Companies Law. And the Merger and Acquisition Regulations issued by the Capital Market Authority.
At a time when an official joint document between the two banks released yesterday revealed that “Al-Ahly Commercial” will continue to exist while Samba Bank expires and all its shares are canceled, the total net income of the two banks is expected to reach 7.2 billion riyals ($ 2 billion), according to the consolidated financial results of the first half. As of this year, total assets total 837 billion riyals ($ 223 billion), with a combined equity base of 120 billion riyals ($ 32 billion).
According to the document, the two banks agreed to take the necessary steps to undertake upon the completion of the merger by appointing Eng. Ammar Al-Khudairi (currently Chairman of the Samba Financial Group) as Chairman of the Board of Directors of the new bank (the merger) and appointing Saeed bin Muhammad Al-Ghamdi (currently Chairman of Al-Ahly Commercial Board) as the Managing Director. Group CEO.
The final swap factor for the two banks, which will constitute 25 percent of the banking sector, individuals and establishments market, will be 0.73 of the National Bank’s ordinary shares for each Samba ordinary share. The document distributed yesterday believes that the merger will enable the two banks to generate value in the business and with the participation of best practices highlighting its importance in annual savings as a result of improved efficiencies of 800 million riyals ($ 213 million). It will also provide high liquidity and a strong financial position, as the ratio of loans to deposits reaches 82 percent. The new bank will have a lending force of 468 billion riyals ($ 125 billion), deposits of 568 billion riyals (151 billion dollars) and a semi-annual operating income of about 15 billion riyals (4 billion dollars).
The new bank (whose name has not been disclosed) will become the largest institutional financier in Saudi Arabia, which carries with it hopes to advance the economic transformation in the country by supporting large projects and small and medium enterprises and stimulating trade and cash flows.
According to a statement issued yesterday, the Chairman of the Board of Directors of the new bank, Eng. Ammar Al-Khudairi, confirmed that the merger will launch a leading local bank with regional financial strength that will achieve great value for shareholders and provide exceptional banking services that support analyst entrepreneurs to take advantage of the investment opportunities available to achieve growth and expansion, stressing that the new bank It will contribute to achieving many of the goals of the Kingdom’s Vision 2030.
For his part, the managing director and CEO of the prospective bank, Saeed Al-Ghamdi, pointed out that Saudi Arabia is witnessing historical developments under the umbrella of Vision 2030, which requires the presence of a strong financial sector and banks that have solvency and high flexibility to advance economic development and support Saudi trade and cash flows to and from the Kingdom at the regional level. And the world.
Al-Ghamdi added, “Our ambition is to establish a national financial entity that supports the achievement of the goals set by the Saudi Vision and is the first innovation for advanced banking services and a nucleus for building future leaders in the industry.” According to the document, the new bank will be able to achieve the highest levels of returns and productivity rates at the sector level, as the bank will have a balanced global banking platform in all banking sectors, as the operating income is expected to be as follows: 41 per cent of the income of individual banking operations, and 25 per cent. 1 percent from corporate banking, 23 percent through treasury activities, 6 percent from international banking services and 5 percent through financial market services.
It is not the first time that Al-Ahly Commercial has discussed the idea of ​​a merger. The past year entered into merger talks with Riyad Bank, while the same year witnessed the merger of SABB and Al-Awal banks, which legally ended in June of 2019, and formed a third largest. Bank by assets in the Kingdom.
In light of the news of the expected huge merger, the stock market continued at the beginning of the week’s trading yesterday, Sunday, the point rally to stop at levels before the beginning of the current year 2020 and touching a point it achieved in August of the previous year 2019, in a development that gives an optimistic indication of macroeconomic conditions and strengthens the market Finance as promising investment opportunities in this period. The Saudi market index ended the session yesterday, rising by 1.2 percent at 8,513 points, up 100 points, registering the highest close since August of last year, while liquidity continues to raise the daily average trading value, reaching 11.7 billion riyals ($ 3.1 billion) yesterday.
In practice, the three major stocks with a weight on the general index responsible for the rise in the market index yesterday, as SABIC’s share increased by 5.9 per cent, to stop the share price at 97.80 riyals, while the share of “Al-Rajhi Bank” rose by more than one percent at 67.10 riyals. Meanwhile, the “Saudi Electricity” share closed up 5.2 percent at 20 riyals.

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The Saudi economy

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