Analysis: Merging FGB-NBAD should make a big leap of faith | The National

Analysis: Merging FGB-NBAD should make a big leap of faith | The National:

"This article was meant to be about managing a merger. It turns out that this is hard to explain without first understanding the goal of the merger. There has been little information made public in terms of the thinking behind the FGB-NBAD merger, with some commentary from analysts. Here I will discuss various ideas on the merger.

1 So why might FGB and NBAD have decided to merge? One oft-quoted reason is that it was a political decision. But to what end? I’m pretty sure that politics do not drive commercial decisions.

2 Next is the idea of cost savings. Merging the two companies does not only offer the possibility of eliminating overlapping functions, there is also the possibility that FGB’s cost effectiveness, as measured by a cost/income ratio of about 20 per cent, can bring down NBAD’s same ratio of about 38 per cent. That would be a big saving indeed. But in the end it is no different to FGB growing assets organically. A merger doesn’t necessarily make it faster, after accounting for merger costs, it might be the same."



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