MENA Merger Is Cross-Border Power Play

With oil prices low and stress on liquidity, banks in the GCC are increasingly looking to consolidate in order to remain strong.

Kuwait is not immune to the merger-and-acquisition fever roiling the Gulf Cooperation Council’s (GCC’s) banking sector. Kuwait Finance House (KFH) is in the final stages of acquiring Bahrain’s Ahli United Bank (AUB). The merger had been in the pipeline since 2018; the central banks of Kuwait and Bahrain gave the deal the green light only in late 2019.

Together, KFH and AUB will form Kuwait’s biggest bank and the GCC’s sixth-largest lender, with over $100 billion assets under management. It will also be one of the world’s most important Islamic banks.

“The integration of the new entity will enhance profitability by reducing costs and increasing pricing power and liquidity,” said KFH Chairman Hamad Abdulmohsen Al-Marzouq in a January 2019 press release. “Also, KFH will benefit from access to new markets, establishing its leadership position in Kuwait and exchanging banking expertise between the two banks.”

The final price, reportedly set at $8.8 billion, will increase acquirer KFH’s lending capacity by 61%, it claims. This is expected to boost its capacity to finance large-scale infrastructure projects.

The KFH-AUB merger is the GCC’s first cross-border consolidation in several years. After completion, KFH will be able to scale, not only across the region but also globally, by taking over AUB’s existing network of banks in eight countries including Egypt, Libya, Iraq and the UK.

With oil prices low and stress on liquidity, banks in the GCC are increasingly looking to consolidate in order to remain strong. The trend is expected to continue in coming years, with tens of merger talks already underway.

According to the latest data from Markaz (Kuwait Financial Centre), Kuwait was the second-largest M&A market in the GCC between 2014 and 2018, after Saudi Arabia, with a 163% increase in transactions.

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