World Economy

Arab Bank Mergers Unlikely

Arab Bank Mergers UnlikelyArab Bank Mergers Unlikely

Merger and acquisition activity among the Persian Gulf Arab banks is unlikely to increase despite a tougher operating environment across the region, according to Fitch Ratings, Arabian Business reported. The ratings agency said that even in cases where mergers appear to make sense, such as the planned merger of Bank Dhofar and Bank Sohar in Oman, negotiations can be protracted and difficult. The Omani banks called off the merger last week. “We consider Bahrain’s banking sector, and particularly its Islamic banking sector, to be overbanked. We think the entire banking sector would benefit from consolidation because many of the banks lack sufficient scale. Some M&A activity is taking place across Islamic banks, encouraged by the central bank, but no major consolidation appears to be on the cards,” the agency said. Fitch said banks across the region are facing some pressure on profitability and a tightening of liquidity, especially in countries where public sector deposits are being withdrawn from the banks to shore up government finances.


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