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Kuwait’s Gulf Bank and Warba Bank are exploring a potential merger which could lead to the creation of one of the largest Shariah compliant banks in the Gulf country.
Warba Bank, which is Gulf Bank’s largest shareholder with a stake of 32.75%, initiated talks for a feasibility of a potential merger between the banks, which was later approved by the Gulf Bank board.
Warba Bank said the potential merger would enhance “competitiveness in the local Islamic banking sector.”
This is the third merger discussion involving Gulf Bank, with a potential merger with Kuwaiti lender Boubyan Bank called off in January following the disclosure that shareholder, Alghanim Trading, would divest its entire 32.75% stake in GBK to Kuwait’s Warba Bank for 498.2 million Kuwaiti dinars ($1.61 billion).
In July 2023, Gulf Bank and Al Ahli Bank of Kuwait announced they were no longer pursuing a merger, following the completion of feasibility studies by consulting companies they appointed in December 2022.
A merger between Gulf Bank and Warba Bank would create the third largest financial institution after KFH and NBK, with total assets reaching KWD13 billion.
The feasibility study aligns with a Fitch Ratings forecast last month, with Redmond Ramsdale, the Head of Middle East Bank Ratings and Islamic Banking, telling Zawya Islamic bank mergers and acquisitions are expected to rise in the GCC in the short to medium term, driven by the search for competitive advantage to access growth opportunities and build low-cost deposits.
“The region is over-banked, and therefore we expect consolidation to continue in all countries,” Ramsdale said.
A Gulf Bank-Warba Bank merger would potentially be the second significant M&A event in the GCC involving major lenders, with the UAE’s Emirates NBD initiating a mandatory cash offer in March to acquire the remaining 0.11% stake in the Dubai-listed Emirates Islamic Bank (EIB) at 11.95 UAE dirhams per share, totalling approximately 69.8 million UAE dirhams.
(Writing by Bindu Rai, editing by Brinda Darasha)
