After oil prices tumbled in mid-2014, GCC banks have had to adjust to an era of lower growth, amid a wider macroeconomic slowdown in the region and constrained government spending. Lenders across the region have been facing tighter liquidity and pressure on profitability, against a backdrop of weaker deposit growth and revenue generation.
Accordingly, the banking industry has seen many headlines relating to mergers, acquisitions, and stake sales over the past couple of years, most notably the creation of First Abu Dhabi Bank earlier this year through the merger of National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB).
Among the more recent announcements was the sale of Credit Agricole Corporate and Investment Co.’s 16.2 percent stake in Tadawul-listed Banque Saudi Fransi to Kingdom Holding Co. last month.
Argaam takes a look at some potential and past mergers in the Gulf banking sector.
Potential/Upcoming
1) Alawwal-SABB, Saudi Arabia
In April this year, Alawwal Bank started preliminary talks on merger with Saudi British Bank (SABB), after obtaining the approval of the boards of directors. British banks have stakes in both lenders; HSBC Holdings owns 40 percent of SABB, while Royal Bank of Scotland holds a 40 percent stake in Alawwal via its acquisition of ABN AMRO.
The merged bank is set to become the Kingdom’s third largest bank by assets, and the second largest in terms of capital. Saudi British Bank (SABB) has reportedly appointed Goldman Sachs to advise on the merger, while Alawwal Bank is said to have picked JPMorgan as financial advisor.
2) Masraf Al Rayan-Barwa-IBQ, Qatar
Qatari banks Masraf Al Rayan, Barwa Bank, and International Bank of Qatar (IBQ) began initial negotiations last December for a potential merger, in a deal that would create the country's second-largest bank. Upon completion of the deal, which is expected by year-end, the new bank will have assets worth more than $44 billion.
3) Kuwait Finance House-Ahli United Bank, Kuwait/Bahrain
Kuwait’s biggest Islamic lender, Kuwait Finance House (KFH), is looking to merge with Bahrain’s Ahli United Bank (AUB), it said in July. The deal will result in the second largest Islamic lender in the GCC after Al Rajhi Bank.
“However, modalities of mergers would need to be worked out as KFH is a full-fledged Islamic bank while AUB Bahrain on the other hand operates a mix amongst conventional and Islamic,” Oman’s U Capital said in a recent note, adding that AUB’s operations in Kuwait are Islamic whereas its operations in other countries are mostly conventional.
Past
4) First Abu Dhabi Bank, UAE
First Abu Dhabi Bank (FAB) was created this year with the merger of NBAD and FGB, the United Arab Emirates’ two largest lenders by market value. The bank has total assets of above AED 670 billion, making it one of the Middle East’s biggest lenders.
The bank’s CEO Abdulhamid Saeed said in May that is studying expanding into Saudi Arabia, either through acquisitions of existing banks or by obtaining a new banking license. The lender is also eyeing the Asian market for its high potential, and is open to buying other national banks in the UAE, given that the sector is expected to see more consolidation, he was quoted as saying.
5) Emirates NBD, UAE
Prior to the formation of FAB, one of the most prominent mergers in the region’s banking sector was in 2007, when Emirates Bank International (EBI) and National Bank of Dubai (NBD) combined to form Emirates NBD. As of June 30, 2017, Emirates NBD had total assets of AED 456.2 billion (about $124 billion). The Group has operations in the UAE, Saudi Arabia, Egypt, Singapore, the UK, and representative offices in India, China and Indonesia.
Write to Jerusha Sequeira at jerusha.s@argaamnews.com
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