Moscow has already ramped up military spending to levels not seen since the Soviet era
europe1 hour ago
GCC's banking sector is expected to see a new round of mergers and acquisitions (M&A) in the wake of the latest such move initiated by Kuwait Finance House and Ahli United Bank of Bahrain, according to bankers and analysts.
At least five M&A deals - three in the Islamic banking space and two in conventional - are in various stages of discussion, according to U Capital.
The new round of M&A follows the landmark merger between National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) in the UAE, resulting in creation of the regions second biggest bank.
The ongoing merger talks between Kuwait Finance House and Ahli United Bank of Bahrain is the first cross-border deal as earlier mergers were mostly between banks that were headquartered in the same country, analysts at U Capital said.
"New in the region, small size of Islamic banks is a factor that hurts them more forcing them to look for different ways of survival. Such is the scale of top four conventional banks that their assets cover up the entire assets of Islamic banks in the GCC," U Capital said.
Combined assets of four top conventional banks in the region stand at $621 billion whereas the assets of entire Islamic banks in GCC stand at $563 billion as of second quarter 2017.
"Hence, creation of bigger Islamic banks has become necessary as it could rival not only other Islamic banks in the region, but also the giants on the conventional side," analysts said.
"Prompted by emerging macroeconomic scenario, altering regulations, change in consumer behavior and demographics, the new landscape of M&A is here to stay and is having far reaching impact at both the operational and strategic level," U Capital.
Analysts pointed out that GCC banking sector has experienced a fundamental change in last couple of years. "Higher growth era fuelled by higher oil prices has gone leaving behind a diversified banking sector. The sector has seen a flurry of headlines related to mergers, acquisition, sale of stake from one strategic investor to another and many more."
The last mergers in the Islamic banking industry were seen in 2012-13 when Dubai Bank merged with Emirates Islamic Bank and Capivest, Elaf Bank and Capital Management House merged to form Ibdar Bank. While on the conventional banking side the latest merger was amongst First Gulf Bank and National Bank of Abu Dhabi.
According to banking sources, Masraf Al Rayan, International Bank of Qatar and Barwa Bank are in the due diligence phase. The three-way merger is expected to create the largest Islamic bank in Qatar. Saudi British Bank and Alawwal Bank are also said to be discussing a potential merger that would create the third-largest bank in Saudi Arabia.
However, Fitch Ratings said in a note that a pick up in mergers and acquisitions among banks in GCC is unlikely due to structural impediments, "despite market conditions that appear conducive and numerous rumours about potential deals."
Industry experts aid banks across the region are facing pressure on profitability and tighter liquidity, especially in countries where public sector deposits have been withdrawn from banks to shore up government finances weakened by lower oil prices. The UAE, Bahrain and, to some extent, Oman would benefit from consolidation as many banks in these countries lack sufficient scale.
According to Fitch, the ownership structure of GCC banks is also a stumbling block to M&A approvals. In most cases, well established local private shareholders often control sizeable stakes and foreign banks only hold minority stakes. -issacjohn@khaleejtimes.com
Moscow has already ramped up military spending to levels not seen since the Soviet era
europe1 hour ago
Ronaghi accuses security personnel who arrested him earlier this week of subjecting him to sexual abuse and insults
mena1 hour ago
The 16-year-old Welsh golfing prodigy claims both the Overall title and the Boys' Under-16 Division title at Al Ain Equestrian, Shooting & Golf Club
sports1 hour ago
Adani Group denied the allegations as baseless, while Indian government officials haven't commented so far
business1 hour ago
Thursday's attacks targeted two separate convoys of Shiite Muslims travelling in Kurram, Javed ullah Mehsud
asia1 hour ago
NIC sold 6.5 million shares, representing a 3.2% stake in Boursa Kuwait
markets2 hours ago
The RTA offered alternative routes for motorists to reach their destination during this time
transport2 hours ago
Roundtable provides gateway to bilateral investment in green-tech and creative industries
business2 hours ago