Stemming from the unsuccessful three-way merger with Masraf Al Rayan, Barwa Bank and the International Bank of Qatar (IBQ) have now completed the first legal merger of banks in Qatar’s history, creating a new fully-fledged Islamic bank with total assets valued at more than QAR80 billion (US$21.96 billion). MARC ROUSSOT delves further.
The new entity operating under the name Barwa Bank will serve wholesale, private and retail clients through both banks’ current networks of existing branches, while also offering wealth and asset management services, as well as solutions to tap Islamic capital markets.
With operational integration expected to be completed by the fourth quarter of 2019, Barwa Bank will be active in local and regional markets. However, the ongoing diplomatic standoff, which started in June 2017 while merger negotiations were underway, will make it difficult, if not impossible, for the bank to tap Saudi Arabia, the UAE and Bahrain. The three countries have placed Qatar under strict blockade, accusing the State of supporting terrorism, an allegation that Qatar has repeatedly denied.
In this challenging environment, the completion of Barwa Bank and the IBQ’s merger is a momentous milestone for the local banking sector, regional merger and acquisition (M&A) landscape and Shariah compliant banking industry, said Mohammad Hamad Jassim Al Thani, the chairman and managing director of Barwa Bank and a son of Hamad Jassim Jabor Al Thani, a former prime minister of Qatar and the chairman of the IBQ’s board of directors.
The successful consolidation bodes well for the GCC’s M&A movement, triggered by First Gulf Bank and the National Bank of Abu Dhabi’s merger in 2016, and fueled by slower economic and credit growth amid low oil prices, higher capital requirements from Basel III and stiff competition.
In Oman, Alizz Islamic Bank and Oman Arab Bank have agreed to consolidate their businesses. In addition, Bahrain’s Ahli United Bank is in advanced talks with Kuwait Finance House while Saudi Arabia’s National Commercial Bank and Riyad Bank are considering tying up, following Saudi British Bank and Alawwal Bank’s agreement to consolidate operations.
Last but not the least, a three-way M&A involving Al Hilal Bank, Abu Dhabi Commercial Bank and Union National Bank is scheduled for the 1st May 2019 and is expected to create the third-largest bank in the UAE, with total assets of AED420 billion (US$114.33 billion) as well as the nation’s third-largest Islamic banking franchise.
A similar combination exercise which failed led to the origination of Qatar’s new Islamic bank. Barwa Bank, the IBQ and Masraf Al Rayan had started merger talks in December 2016 with the aim of creating the country’s largest Shariah compliant bank and the Middle East’s third-biggest Islamic lender with more than QAR178 billion (US$49 billion) of assets, but the deal stalled as shareholders reportedly disagreed on pricing.