Dubai – Mubasher: Smaller lenders in the UAE should consider merger and acquisition (M&A) deals as the UAE banking sector grows, The National reported on Sunday, citing Emirates NBD CEO Shayne Nelson as saying.
Larger banks are investing heavily in digital transformation services, which may “stifle” business opportunities for smaller-sized banks, he said, noting that M&As will enable smaller banks to compete with their larger counterparts.
“For the size of the economy and the size of the population, there are too many banks," Nelson told The National, highlighting that “There is a necessity for those banks to merge overtime. Frankly, the sooner they do it, to me, they will be in a better position."
Emirates NBD, the biggest bank in Dubai by assets, plans to spend AED 1 billion in technology over the next three years, the top official revealed.
Similarly, Mashreq Bank is also planning to invest in artificial intelligence and in digitising its services, alongside other financial institutions, according to the newspaper. Such investments will help banks cut costs amid continued pressure on banks’ profits and slower economic growth.
Recently Abu Dhabi-based First Gulf Bank and the National Bank of Abu Dhabi (NBAD) merged into First Abu Dhabi Bank (FAB), creating one of the largest lenders in the UAE.
FAB’s investment in digitisation will make it harder for smaller banks to maintain growth, the Emirates NBD official commented.
“If I’m going to spend a AED 1 billion on technology -- arguably we are the best digital bank in the region --- and FAB is going to do the same thing, which they will …. how the small guys [banks] can compete: what is their niche going to be,” Nelson told The National.
Emirates NBD and FAB have a combined market share exceeding 40%, Nelson noted.
There are some 46 commercial banks in the UAE, added to nine international ones, data released by the Central Bank of the UAE showed.
