National Commercial Bank, Saudi Arabia’s largest lender by assets, agreed to buy rival Samba Financial Group. The offer is a 3.5 per cent premium to Samba’s October 8 closing price of 27.50 riyals and about 24 per cent higher than the level the shares traded at before the talks were made public. new bank will have total assets of more than $220bn, creating the Gulf region’s third-largest lender. The entity’s $46bn market capitalisation nearly matches that of Qatar National Bank, which is still the Middle East’s biggest lender with about $268bn of assets. Banks in the oil-rich Gulf have been combining as regional economies suffer the twin shocks of lower energy revenues and the global coronavirus pandemic. The Saudi consolidation also coincides with a long-awaited wave of banking mergers in Europe, where lenders are exploring tie-ups or have begun taking over smaller rivals.
Merging two major domestic banks is a key component of Crown Prince Mohammed bin Salman’s “Vision 2030” initiative to diversify the Saudi economy away from oil by creating local champions in industries such as finance. The kingdom’s sovereign wealth fund – the Public Investment Fund – of which the crown prince is the chairman, will be the largest shareholder in the combined NCB-Samba entity with a 37.2 per cent holding. The combined bank’s targeted cost synergy of 9 per cent is below regional peers, leaving room for an upside post integration. A better funding structure and an opportunity in cross-selling products should boost revenue by at least 2 per cent.