By: Mahmoud Gamal 

Abu Dhabi - Mubasher: Mergers return again to the UAE’s markets amid reports concerning talks held by Bank of Sharjah and Invest Bank with regard to a potential merger.

That will be the second merger in the banks sector in a year after the merger between National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) to create First Abu Dhabi Bank (FAB).

Strong entities

The merger between banks in general and small financial entities like Bank of Sharjah and Invest Bank is a must, said Wadah Al-Taha, member of the National Advisory Board of Chartered Institute for Securities and Investments (CISI).

The growth of banks’ number in the UAE raised a negative competition between them to increase their market shares, Al-Taha added.

Official statistics reported that there are 48 local, regional, and international banks operate in the UAE.

Mergers will enable small banks to address challenges facing the sector, in addition to the compliance with the international regulations organising liquidity and boosting development projects’ financing, the analyst commented.

Protection against risks

These mergers serve as a shield for banks to push back against future risks, which weighed on profits, Eyad Al Bariqi, director general of Al Ansari Financial Services, told Mubasher.

Among other solutions banks utilise to address these challenges, like layoffs or capital increase, mergers remain the best resort for banks, Al Bariqi added.

Mergers will provide a shot in the arm to liquidity of banks’ shares, especially small banks, Mena Corp financial analyst Issam Kassabieh remarked.

Kassabieh further stated that mergers bear a positive impact on national economy and the banks sector in particular.

Translated by: Muhammad Khalid