Over the past year, the oil-rich emirate of Abu Dhabi has explored a string of ambitious acquisitions in the international banking sector in an attempt to become a global financial powerhouse. None have panned out so far.
The Abu Dhabi wealth fund ADQ held preliminary talks to acquire boutique investment bank Lazard Ltd. at the start of the year, according to people familiar with the matter. The discussions quickly fell apart over differences about the future independence of the 175-year old Wall Street firm, the people said, asking not to be identified because the discussions are private.
Around the same time, First Abu Dhabi Bank PJSC was said to weigh an offer of as much as $35 billion for Britain's Standard Chartered Plc. It had tried to buy Egypt's biggest investment bank in 2022. Neither of those deals materialized.
Royal Group, chaired by United Arab Emirates National Security Advisor Sheikh Tahnoon bin Zayed Al Nahyan, considered a possible takeover of the U.K. arm of Silicon Valley Bank following its collapse, people familiar with the matter said in March. The unit was ultimately purchased by HSBC Holdings Plc for £1 ($1.3).
Abu Dhabi has succeeded in pulling off some niche deals in the financial industry, but there's no sense that it is likely to stop looking for a big deal. The emirate manages about $1.5 trillion of sovereign wealth and is also home to funds such as the Abu Dhabi Investment Authority and Mubadala Investment Co. The expansion is being driven by the ambition of the ruling Al Nahyan family — and in particular Sheikh Tahnoon — to win more global heft for the emirate, as well as the need to find new avenues for its banking sector to grow.
"The commercial banking sector in Abu Dhabi remains to a large extent localized despite the sheer size of the balance sheets of its megabanks," said Karim Souaid, managing partner of Gulf-based private investment company Growthgate Capital. "The sector is poised to go global in order to follow the diversification policy, recycle its petro-dollars and capture new opportunities."
The UAE's government media office referred questions to the Abu Dhabi media office, which didn't respond to a request for comment.
Limited Expansion
The UAE has a relatively small population with a little more than 9 million people. A large number of regional and foreign banks already operate there. With limited expansion opportunities left in its home market, some of its financial institutions are looking overseas.
FAB — as the Abu Dhabi bank is known — has long jockeyed with Qatar National Bank for the status of the Middle East's biggest lender. Both banks have outlined their intentions to grow internationally, but such expansion has so far been confined to regional countries such as Turkey and Egypt.
The series of takeover attempts by Abu Dhabi offer a window into the outsize ambitions of the wealthiest Middle Eastern institutions to assume a greater role in global finance, as well as the difficulties they face in achieving them.
FAB bought Bank Audi's Egyptian unit in 2021. A year later it withdrew a $1.2 billion bid for Egyptian investment bank EFG-Hermes after facing lengthy regulatory delays, Bloomberg has reported. In the case of Standard Chartered, getting a deal done was complicated and ambitious given the hurdles and the differences in the scale of the two banks. Regulatory approvals and compliance were among the obstacles to a successful acquisition, people familiar with the matter said earlier this year.
Not all discussions have been unsuccessful. In May, Mubadala bought a majority stake in Fortress Investment Group by teaming up with the US asset manager's management team, in a deal that valued Fortress at more than $2 billion.
Abu Dhabi's growing ambitions come at a time when a string of banks have failed globally. Flush with cash after oil's recent surge, the region remains home to a handful of financial institutions with the ability to raise substantial cash to pull off rescue packages or large deals. In 2008, the Gulf's richest monarchies also stepped in to buy stakes in western lenders such as Citigroup Inc.
Earlier this year, ADQ and International Holding Co. — both chaired by Sheikh Tahnoon — set up a new investment group with the backing of U.S. private equity firm General Atlantic. The entity is seeking to become the largest asset manager in the region. A deal for Lazard, which manages about $235 billion of assets, would have significantly boosted ADQ's capabilities, according to a person with knowledge of ADQ's investment strategy. A representative for ADQ declined to comment.
A successful deal for Standard Chartered with a balance sheet twice its size would have catapulted FAB into an emerging markets banking giant with more than $1 trillion in assets — about a third of the size of HSBC. At the time, FAB confirmed it had explored a bid, but said it was no longer considering an offer.
Shabbir Malik, a banking analyst at EFG Hermes, expects FAB to continue looking for deals.
"For FAB to continue growing at the same pace of recent years, it needs to look for expansion outside the UAE," he said. "The short- and near-term outlook for their stock and financial performance will be shaped by the quality of M&A it does."
--With assistance from Abeer Abu Omar.
