Doha: Qatari banks Masraf Al Rayan, Barwa Bank and International Bank of Qatar (IBQ) are in talks on a three-way merger as consolidation accelerates across the Middle East’s banking industry.
The potential combination would create the largest sharia-compliant bank in Qatar and the third largest such lender in the Middle East, with assets worth more than 160 billion riyals ($44 billion), Masraf Al Rayan said late on Monday in a statement. Talks are at an early stage, according to the banks.
Sustained low oil prices are forcing Gulf lenders to consolidate for more scale and to better compete in a crowded market. Abu Dhabi lenders National Bank of Abu Dhabi and First Gulf Bank agreed to merge earlier this year to create a regional powerhouse with $175 billion of assets.
The merger of Masraf — with a market value of about $7.3 billion — with privately held Barwa and IBQ is subject to approvals from shareholders and Qatar’s Central Bank, according to the statement. Shares in Masraf rose more than 7 per cent to 38 riyals, the most since Jan. 24, and were up 4.1 per cent to 36.95 riyals at 9:44amin Doha.
Wave of consolidation
It’s not just banks that are merging as a result of the new reality in energy prices. Governments in the Middle East are also combining state-owned investment firms and energy companies. Qatar is merging two of its gas companies, QatarGas and RasGas, in a move that will save hundreds of millions of dollars, Qatar Petroleum CEO Saad al-Kaabi said earlier this month. Abu Dhabi announced plans to merge sovereign wealth funds Mubadala Development Co. and International Petroleum Investment Co. in June.
"Similar to some of its neighbors, Qatar’s banking sector would benefit from consolidation given the number of players fighting for a share of the pie,” Akber Khan, senior director of asset management at Al Rayan Investment in Qatar, said today by e-mail. "However, merger efforts have not been successful in the past, highlighting the complexity of such negotiations.”
IBQ was previously involved in talks to merge with Al Khaliji that collapsed in mid-2011 without a deal being reached.
Sovereign wealth fund Qatar Investment Authority holds a 15.7 per cent stake in Masraf, according to data compiled by Bloomberg. Qatar’s General Retirement and Social Insurance Authority and Military Pension Fund own about 20 per cent each of Barwa Bank, while Qatar Holding, a unit of the sovereign wealth fund, has a stake of 12.13 per cent, according to the bank’s financial statements for the first half. IBQ’s shareholders include Broog Trading Co. and Al Sanad Commercial Co., according to its 2015 annual report.
Qatar, a country of more than 2 million people, has about 20 local and international banks competing for a share of business. Qatar National Bank SAQ, is the largest lender in the Gulf state with a market value of about $36 billion and assets of about $196 billion.