Region needs more banking mergers

27 June 2008
The longer other banks wait to create a strong competitor, the greater the chance that Emirates NBD will be able to succeed.

So far, the creation of Emirates NBD has not been the transformative deal that many expected when it was announced in 2007. The wave of consolidation that was predicted has not occurred, and the frequently suggested combination of nearby rivals National Bank of Abu Dhabi and Abu Dhabi Commercial Bank looks no closer.

In a way, this is good for Emirates NBD, which is now the biggest bank in the region in terms of assets. The lack of other mergers means its place on the throne will remain unchallenged for some time. But it still has plenty of other tests.

Rick Pudner, chief executive officer of Emirates NBD, has to take the institution through a tricky integration process, which includes moving the two banks to a single, core banking software system.

If this goes well, it could give Emirates NBD some of the best back-office capabilities in the region. If it goes badly, it could cost it dearly in terms of customers and reputation.

Managing this, while ensuring that the bank does not fall behind in its expansion strategy, is a huge task.

Retaining its position in its home market alone will require a continued drive to open new branches. But creating a global banking brand will take more than that.

Expansion into other GCC markets is fraught with difficulties, especially as every large bank in the region has similar ambitions. Making the most of a new licence from the Capital Market Authority in Saudi Arabia and boosting its existing small presence there will be a key factor in giving the bank an edge over its rivals.

If it is successful, it will surely encourage other banks to club together into bigger firms. But the longer they wait to create a stronger rival, the greater the chance that Emirates NBD will be able to succeed.

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