Qatari banks Masraf Al Rayan, Barwa Bank and International Bank of Qatar have begun initial talks for a potential merger, the banks said yesterday, in a deal that would create the country’s second-largest bank.
If the deal goes ahead, it would be a rare example of consolidation among banks in the Gulf, which have previously been reluctant to tie up but are facing challenging conditions due to the impact of lower oil prices on the region’s economies.
The trio have begun initial discussions “to create a larger and stronger financial institution with a solid financial position and liquidity to support Qatar’s economic growth”, according to a joint statement from the three banks sent to Reuters.
The new bank, which would be run in compliance with Islamic banking principles, would have assets worth more than QR160bn ($44bn), it added.
Masraf Al Rayan is already the second-largest bank in Qatar by market capitalisation and the largest Qatari constituent in the MSCI Emerging Markets index.
It had assets worth QR87bn as of Sept 30, according to its financial statement.
Both Rayan and Barwa Bank are Islamic institutions, but IBQ currently follows conventional banking principles.
Qatari regulations do not allow a lender to operate both standards, so IBQ would have to convert its business to being Shariah-compliant should a deal go ahead.
Consolidation has long been talked about in the Qatari banking sector given that 18 local and international commercial banks serve a population of 2.6mn.
However, reluctance among local shareholders to cede control, given the prestige of owning a bank, plus buoyant local economic conditions in recent years, have prevented tie-ups.
With state spending being trimmed to adjust to lower oil prices, hitting banks’ deposit growth and revenue generation, the argument for consolidation is now more compelling.