Saudi Gazette report
RYADA – Saudi Arabia’s largest lender, the National Commercial Bank (NCB) and Samba Financial Group have signed a binding agreement to form a joint venture with assets of SR837 billion ($ 223 billion).
The transaction will enable the NCBs to become the third largest banking structure in the Arab world and the first in the Middle East in terms of net income. It will become the leading bank in the Middle East region, with a market capitalization of SRR 171 billion (USD 46 billion).
At the local level, it will become the UK’s largest bank, serving around 25 per cent of the retail and wholesale banking market. The merged bank will use the NCB’s and Samba’s leading retail banking franchises, serving 26 percent of the retail loan market and 29 percent of the retail liabilities market.
Upon completion of the merger, Samba shares will be transferred in favor of the NCB, as it will issue several new shares, under which Samba shareholders will receive 0.739 new NCB shares for each Samba share, the NCB announced at the stock exchange submission on Sunday.
The transaction will be implemented through the merger of Samba with the NCB, as a result of which all of Samba’s assets and liabilities will be transferred to the NCB, the statement said.
Once the transaction is completed, only the NCBs will survive, but Samba will no longer operate. Its shares will be canceled and new NCB shares will be issued to its shareholders.
According to the agreement, the headquarters of the new lending NCB will be moved to Riyadh from Jeddah by appointing the Chairman of the Board of Directors of Samba Ammar Alkhudairy as the Executive Director of the NCB.
Said Al-Ghamdi, the current Chairman of the NCB’s Board of Directors, will be appointed Managing Director of the new NCB.
The two banks agreed to appoint a specialized consulting firm to advise on the name, logo and identity of the merging bank, which will be determined later.
The merger will create a strong regional lender with assets of SRR 837 billion and the new entity will become the largest bank in the UK with a market value of SR1 171 billion and loans of SR 468 billion.
The new bank’s half-year operating income would reach SR 15 billion, corresponding to 30 percent of market share, while the bank’s net income would reach SR 7 billion, representing 38 percent of market share. The bank’s consolidated capital base is expected to reach 120 billion SRR.
The new entity will have a balanced global banking platform across all banking sectors, while its operating income will come from a number of sectors, including 41 percent of retail banking services; 25 percent of corporate banking services; 23 percent of cash operations; six percent of international banking services; and five percent of financial markets.
At the end of June 2020, the merged entity would be the third largest lender in the Arab world with more than SR837 billion ($ 223 billion) in assets, representing a 32 percent market share.
It would have SR468 billion (USD 125 billion) in lending, representing a 29 percent market share; approximately SR568 billion ($ 151 billion) in customer deposits, representing a 30 percent market share; half-year operating income is approximately SR15 billion (USD 4 billion), representing a 30 percent market share; and net income of approximately SRR 7 billion (USD 2 billion), representing a market share of 38 percent; and the total equity base is SR120 billion ($ 32 billion).
Both the NCBs and Samba are government entities as significant shareholders. Upon completion of the merger, the existing shareholders of the NCB will own 67.4 per cent of the merged entity, while the shareholders of Samba will own 32.6 per cent of the merged bank.
The new shareholder’s largest shareholders will be the Kingdom’s public investment fund, the Public Investment Fund, with a 37.2 per cent stake. The State Pension Agency will control 7.4 percent, while the General Social Insurance Organization will own 5.8 percent.
“This merger process marks the beginning of a new era in Saudi banking,” said Alkhudairy, the current chairman of Samba.
A few months ago, NCBs and Samba announced the signing of a framework agreement to launch a due diligence process and agree on final and binding terms for a possible merger.
The NCBs announced that on 25 June 2020 it entered into a framework agreement with Samba Financial Group to initiate a mutual due diligence process and agree on final and binding terms for a possible merger between NCBs and Samba Financial Group.