A Major Saudi Bank Merger

A Major Saudi Bank Merger

over 3 years ago1 min

Saudi Arabia’s National Commercial Bank (NCB) and Samba Financial Group agreed to join forces late on Sunday, with their $15 billion deal the global banking industry’s biggest this year 🏦

What does this mean?

NCB, Saudi’s largest lender, will buy smaller rival Samba. No cash is changing hands, however; instead, the Samba band will swap each share they owned previously for a 0.739 share of the new and improved NCB.

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That'll give them a stake in the Middle East’s third-biggest bank, with a market valuation of around $46 billion (all else equal) and more than $220 billion in assets. And that increased clout should please Saudi Arabia’s $380 billion sovereign wealth fund 🇸🇦 As both banks’ biggest investor – naturally – it’ll end up owning 37% of the combined company’s shares.

Source: Bloomberg
Source: Bloomberg

Why should I care?

Samba’s shares rose slightly on Monday; they might’ve risen more but for the fact negotiations had been public for a while and investors had already bet on a deal 🤔 But NCB’s stock price rose too. That’s unusual for the company doing the buying – and could indicate increased investor confidence that the purchase will be beneficial in the long run.

NCB’s swelling comes hot on the heels of last month’s Spanish bank merger, with discussions ongoing elsewhere about how best to escape the profit-punishing effects of low or even negative interest rates 📉 News broke on Monday that the UK’s central bank has been asking how firms there would cope with negative rates – and investors may be tempted to identify which banks could potentially partake in any subsequent tie-ups. HSBC and Lloyds, for instance, are the UK’s most profitable banks – while RBS owner NatWest is the least.

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