Dubai Islamic Bank PJSC, the United Arab Emirates’ biggest Islamic lender, is weighing the possible acquisition of its smaller rival Noor Bank PJSC.
The board has resolved to allow the bank “to explore the possible acquisition of Noor Bank and to revert to the board with findings within three weeks,’ it said in a statement to the stock market. The board also allowed the bank to hire financial advisers for due diligence and provide an opinion on the valuation.
Dubai Islamic Bank held preliminary discussions with Noor Bank shareholders, people familiar with the matter said earlier this month. The acquisition would create a lender with 277 billion dirhams ($75 billion) in assets.
The Middle East’s financial services industry is witnessing a wave of consolidation as banks seek ways to improve competitiveness and boost capital amid slowing economic growth. Abu Dhabi is in the process of merging three of its banks after combining two of its biggest lenders in 2017. Banks in Saudi Arabia, Kuwait and Bahrain are also holding merger talks.
Dubai Islamic Bank shares climbed as much as 1.2 percent after the statement, taking gains this year to 4 percent. The lender reported a 14 percent rise in first-quarter profit to 1.34 billion dirhams, beating the median of two analyst estimates compiled by Bloomberg.
Investment Corp. of Dubai, the emirate’s main state-owned holding company, is the largest shareholder in Dubai Islamic Bank with a 28 percent stake.
It’s also one of the biggest investors in Noor Bank, a lender set up in 2008. Dubai Islamic Bank had assets of 224 billion dirhams at the end of 2018 compared with Noor Bank’s 51 billion dirhams, according to data compiled by Bloomberg.
The UAE, which holds about 6 percent of the world’s oil reserves, is home to about 9 million people. More than 50 banks compete for a share of the domestic market, including the local units of HSBC Holdings Plc, Standard Chartered Plc and Citigroup Inc.
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