The Gulf''s largest bank by assets came in to existence in Dubai today with the merger of Emirates Bank International Ltd. and its smaller rival, National Bank of Dubai, in $11.3-billion deal. Dubai is a part of the United Arab Emirates federation.

With combined assets worth $45 billion, the new entity surpasses Saudi Arabia''s National Commercial Bank as the Gulf''s largest lender by assets and also tops the market value of National Bank of Abu Dhabi, until now the largest in the United Arab Emirates.

The integration will save 151 million dirhams a year in costs by 2010, higher than the 90 million dirhams earlier estimated, with the bulk of cost synergies coming from areas like retail banking.

The shareholders of National Bank would own 33.7-per cent of the new entity with the rest being with Emirates Bank shareholders. The government of Dubai owns 76-per cent of Emirates Bank and 14 percent of National Bank, Dubai''s fourth largest by market value.

Emirates Bank chairman Ahmed al-Tayer and CEO Rick Pudner will be chairman and the chief executive of the new bank respectively. The board of the new bank would have six members from each bank, including National Bank''s chief executive Douglas Dowie.

Created at the behest of Dubai''s ruler, the merged bank, Emirates NDB PJSC, will have about a fifth of total assets, loans and deposits in the United Arab Emirates, the world''s sixth largest oil exporter.

In March the two banks, which first attempted a merger in 1999, had been asked to merge by Dubai''s ruler Sheikh Mohammed bin Rashid al-Makhtoum to form a lender large enough to meet the demands of a rapidly growing economy.

The deal values National Bank shares at 8.84 dirhams ($2.41), which compares with their last traded price of 9.15 dirhams on 1 July, after which trading in shares of both lenders was suspended. Shares in Emirates Bank, Dubai''s second largest bank by market value, are valued at 9.30 dirhams under the terms of the deal, on a par with their last traded price on the same date.

The banks said National Bank shareholders would get a premium of 14 percent to the last trading price before the merger was first announced in March.

Trading the share would resume on 15 July. According to Pudner, the two banks will initially be two legal entities, operating as subsidiaries of Emirates NBD and within 18 to 24 months will be fully integrated.

Shareholders of both banks must approve the merger plan before it takes effect.