Bank mergers help cut funding costs, enhance pricing power.

Merger and consolidation trend among banks in the UAE and other GCC countries will help better-position financial institutions with higher pricing power, and less pressure on funding costs, a report by Indosuez Wealth Management said.

Consolidation will also help banks increase their scale and revenue base, said Aabid Hanif, senior credit analyst at Indosuez Wealth Management Credit Pulse.

Most analysts are of the view that a new round of bank mergers - the fourth series of consolidation in the UAE's banking history - would serve to further consolidate the over-crowded financial system.

In September 2018, Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank announced the start of merger talks. And more recently, three other Abu Dhabi-listed Shariah banks - Bank of Sharjah, Invest Bank, and United Arab Bank - publicly denied media reports of another three-way merger.

"Taking into account the UAE market, the consolidation trend is fundamentally positive and will improve banks through increased pricing power...