Moody’s said the proposed merger between Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB) and Al Hilal Bank (AHB), pending approvals by the banks' Boards of Directors, shareholders and regulators, would be credit positive for UAE banks. The merger would contribute to consolidation of the over-banked UAE banking sector, which will increase banks’ pricing power, reduce pressure on their funding cost and increase their ability to meet sizeable investments. Bank competition in the UAE, where 60 banks serve a population of only nine million, has increased over recent years as lending opportunities decreased following a decline in economic and credit growth amidst lower oil prices. The stronger competition also reflects lenders’ focus on high-quality borrowers, given elevated delinquencies amongst SMEs amidst a soft environment, along with the introduction of a credit bureau. Consolidation of the banking system will also diminish the competitive pressure for funding. System consolidation will also increase banks’ scale and revenue base, improving their ability to meet sizeable investments related to compliance, digitalisation and new accounting standards, such as IFRS9.
 
AD Comm. Bank (AD): AED7.85 as of 10 Sep. 2018, Rating: Buy, TP: AED9.10/share, MCap: USD11,129mn, ADCB UH/ADCB.AD
 
Union Natl. Bank (AD): AED5.00 as of 10 Sep. 2018, Rating: Buy, TP: AED4.30/share, MCap: USD3,748mn, UNB UH/UNB.AD