Emirates NBD chief Shayne Nelson has urged mid-sized UAE banks to consider in-market mergers, saying there are too many banks serving a relatively small population.

Currently, there are 54 banks operating in the country, not including those that function out of the Dubai International Financial Centre (DIFC).

In such a crowded marketplace, banks are struggling to diversify their income streams, Nelson told Gulf Business in an exclusive interview.

"There are a lot of licensed banks in the UAE, but the population isn’t that big. It’s unusual for so many banks to be in a country that has the population that the UAE has," Nelson told the magazine.

"Emirates NBD is an example of where we had two good mid-size banks create a regional champion and we need more of that going forward.

"If you really want to get economies of scale and the capability to diversify your earnings, you need size and capital. And mid-size banks are going to find that difficult because what they can buy will be quite limited for the amount that they can put forward," he said.

Consolidation will enable banks them trim costs and help them concentrate on offering enhanced banking services, he opined.

However, he cited the ownership structure of local banks as deterrent to consolidation.

"A lot of the banks here are controlled by families, which will probably make it a bit more difficult," Nelson said.