x Abu Dhabi, UAEMonday 24 July 2017

Gulf banks may merge to compete

The regional banking market has so far avoided major consolidation, but this could soon change.

DUBAI // The Gulf's banking industry could see a wave of mergers and acquisitions as financial institutions are forced to compete with larger international competitors, a new study says. The regional banking market has so far avoided major consolidation, but changing conditions in the global and regional financial industry have created unique opportunities for a long-predicted wave of M&A activity, according to management consultancy AT Kearney.

"We see great potential for regional banks to consolidate and grow regionally," said Dr. Alexander von Pock, the senior manager, financial institutions group, AT Kearney Middle East. "GCC banks are still small compared to the big international banks and eventually will need to grow externally to compete". From 2002 to 2007, banks in the UAE saw a 39 per cent increase in net profits and a 34 per cent increase in total banking assets, AT Kearney said. The region's top three banks account for just 14 per cent of market share, the study showed.

"The declining market capitalisation of regional banks in the wake of the financial crisis has created favourable conditions for acquisitions and the large proportion of public ownership in some of the banks may also facilitate takeovers," said Dr Dirk Buchta, managing director of AT Kearney Middle East. skhan@thenational.ae