Saudi Arabia’s National Commercial Bank (NCB) has inked a binding agreement to buy rival Samba Financial Group in a transaction valued at $14.85bn.
The merger is expected to create the third-largest bank in the country – headquartered in Riyadh.
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The merger will create a Saudi banking heavyweight with over SAR837bn ($223bn) in assets, SAR468bn ($125bn) in performing loans, and around SAR568bn ($151bn) in customer deposits.
Until the receipt of shareholders’ and regulatory approvals, both the lenders will continue to operate independently.
Terms of the deal
Under the agreement, Samba will merge into NCB and NCB will be the surviving entity.
Samba shareholders will receive 0.739 NCB ordinary shares for each ordinary share held.
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By GlobalDataAs on 8 October 2020, at a closing price of SAR38.50 per NCB share, the deal will value each Samba share at SAR28.45.
This represents a 3.5% premium over Samba’s closing share price of SAR27.50 as on 8 October.
As a result, Samba’s issued ordinary share capital is valued at nearly SAR55.7bn.
Upon completion of the merger, NCB shareholders will own 67.4% of the combined entity and the remaining will be owned by Samba shareholders.
Synergy impact
The combined bank will be the largest bank in the Middle East in terms of net income – SAR7.2bn ($2bn) – with a combined equity base of SAR120bn ($32bn).
The ratio of operating net income by business segment is 41% retail banking, 25% corporate banking, 23% treasury, 5% capital markets and 6% from international operations.
The lender will serve nearly 25% of Saudi Arabia’s retail and wholesale banking industry and register annual efficiency gains of SAR800m ($213m) through increased sales.
The premier financial institution will have a loan-to-deposit (LTD) ratio of 82%. It will offer savings, wealth management, mortgages and consumer finance solutions.
It will provide digital offerings, and access to its branch network as well.
The branding of the merged bank will be divulged at a later date.
Customers of both the banks will not be affected by any immediate changes, as a result of this merger.
Digitalisation and distribution
The merged bank will provide its customers with end-to-end digital banking products and services.
It will also provide immediate access to 501 branches located across the Kingdom, 4,136 ATMs and 126,831 point-of-sale (POS) devices.
Investment portfolio
The Saudi banking heavyweight will handle SAR316bn ($84bn) in treasury assets, representing a market share of 36%.
It will create the largest asset manager, brokerage and investment bank in the Kingdom, owning both NCB Capital and Samba Capital & Investment Management.
NCB and Samba will leverage each other’s cross-selling capabilities to deliver optimised investment portfolios.
Comments
NCB chairman Saeed Mohammed said: “Saudi Arabia is undergoing a historic transformation with Vision 2030. Such a transformation requires a robust financial services sector, especially highly capitalised, resilient banks that can fund economic development, as well as support Saudi Arabia’s trade and capital flows with the region and the rest of the world.”
Samba chairman Ammar khudairy said: “Our merger with NCB will create a local leader and a regional powerhouse that can unlock considerable value for shareholders, provide exceptional banking services for the people of Saudi Arabia and help local entrepreneurs capitalise on opportunities for domestic and international business growth.”
The deal, which was first announced in June 2020, is expected to complete in the first half of next year.
