NBAD-FGB merger could see 28% cost savings, says former Emirates NBD chief financial officer

The merger of two of Abu Dhabi’s biggest banks could lead to cost savings of as much as 28 per cent, according to a senior banker who oversaw the formation of Dubai’s largest bank nine years ago.

“When we look at domestic mergers, we typically look at revenue synergies of somewhere in the region of 6 to 12 per cent and cost synergies of somewhere in the region of 15-25 to 28 per cent,” Sanjay Uppal, who was the chief financial officer of Emirates NBD, said in an interview with Bloomberg TV on Tuesday. National Bank of Abu Dhabi (NBAD) and FGB “should be targeting synergies somewhere close to these benchmarks.”

NBAD and FGB said on Sunday that they’re in talks to merge in a deal that would create the largest lender by assets in the Middle East. A working group of senior executives from banks is reviewing the commercial, structural and legal aspects of a potential deal.

The advantage of having a merger that’s been announced “is that it allows you to plan for your synergies upfront rather than waiting for the conclusion of the legal transaction,” said Mr Uppal, who was CFO when Emirates Bank and National Bank of Dubai merged to form Emirates NBD in 2007. Cost savings could come from the reduction in head office space, administrative costs and branch networks, said Mr Uppal, who is now chief executive of financial consultant StraitsBridge Advisors in Singapore.

The combination of the two Abu Dhabi banks “could be taken to its conclusion in a shorter time” than the Emirates NBD deal, which took about seven months, as that set a “blueprint for future transactions,” he said.

The merger could also lead to further consolidation in the industry, especially amid lower oil prices, Mr Uppal said. “Banks shouldn’t wait until they’re forced to do something,” he said. “A proactive move would certainly help the region.”

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