National Commercial Bank bought Samba: advantages of the deal for the country’s economy
Banks in Saudi Arabia entered into a merger deal. It became known that National Commercial Bank will buy Samba for $15 billion. The decision to merge the country’s largest financial institutions was taken as part of the strategy “Vision 2030”, which aims to develop the kingdom and reduce the dependence of its economy on the oil industry.
It should be noted that these banks were direct competitors, but to achieve a common goal, they decided to unite their efforts. For each share Samba NCB will pay about 7.5 dollars. The share of NCB shareholders in the new conglomerate will make 67.4%, and Samba – 32.6%.
The merger of Saudi financial institutions is the largest in recent years. Their total volume is about 220 billion dollars, which is the third index in the Persian Gulf. Market capitalization of the new corporation is 46 billion dollars, which is equivalent to such giants of the financial market in the region as Qatar National Bank.
Bank merger is one of the main points of the national development program, which was adopted in the kingdom in 2016. The key goal of this strategy is the division of financial flows into the economy, which will reduce the role of oil production for the country. In addition, “Vision 2030” suggests more efforts to improve infrastructure, development of the tourism and service sector.
To implement the strategy, it is important to have a strong financial segment, which will enable diversification processes. And the merger of large banks is an integral part of this.
The largest shareholder of the new company will be the national investment fund managed by the Crown Prince of Saudi Arabia. Its share is 37.2%.
According to analysts’ forecasts, thanks to the merger the united bank will receive about 800 million dollars annually. Completion of the deal is scheduled for the near future, it is accompanied by a change in top management. The head of the new financial group will be Samba chairman of the board, and the head of NCB will take the post of manager.
The merger is a timely decision. During the pandemic, Saudi Arabia and other Gulf countries went through a difficult period. Quarantine restrictions, which have slowed down a number of processes in all segments, as well as reduced demand for energy, have significantly boosted the local economy. Supplies to Europe decreased by 20-30%, while the OPEC+ deal held back production growth. And if in 2019 NBC abandoned the deal with Riyad Bank, now the merger with Samba was a solution to a number of problems and an opportunity to restore processes to pre-crisis levels.
While Saudi Arabia is planning to continue implementing the adopted development strategy, this is partly due to the previously accumulated reserves.