Cross-border Bank Consolidation Likely In GCC, Says Bahrain Bank CEO

Cross-border consolidation of banks in the Arabian Gulf region is logical and is likely to take place in the near future, according to Jean Christophe Durand, the CEO of National Bank of Bahrain.

Speaking to Arabian Business on the sidelines of the GCC Financial Forum in Manama, Durand said that “consolidation is something which is natural” when banks need to make additional investments in their business.

“To maintain their penetration and relevance, banks need to invest a lot, such as in technology To be able to do what that requires in terms of systems, technology and compliance, you need to have a critical mass,” he said. “There will be more opportunities I’m sure, and that will come when investments creep up, when banks need to be more agile.”

“You might find opportunities to join forces,” he added.

Jean Christophe Durand, the CEO of National Bank of Bahrain

In some cases, Durand said banks might consider consolidation when they want to add new business lines, leading to some retail banks absorbing smaller banks that specialise in a particular field.

“It could be cross-border,” he said. “Bahrain is a small-market, but the GCC is well integrated. There could be opportunities for cross-GCC integration, which would make sense.”

In recent years, there has been a wave of mergers and acquisition activity among banks in the GCC, which some analysts have called “over-crowded”.

In the UAE for example, First Gulf Bank and National Bank of Abu Dhabi in 2017 created the largest lender in the UAE, First Abu Dhabi Bank, while in September 2018 Abu Dhabi Commercial Bank and Union National Bank confirmed that they were entering preliminary talks about a possible merger, potentially also involving Al Hilal Bank.

Additionally, in neighbouring Saudi Arabia National Commercial Bank and Riyad Bank announced in December that their boards of directors have approved the commencement of merger discussions, while in October, Saudi British Bank and AlAwwal Bank signed a binding merger agreement in October 2018 that will see the creation of the third largest bank in Saudi Arabia.

A January, Moody’s Investors Service report said that further consolidation is likely in the GCC’s banking sector, with shareholders becoming increasingly aware that such moves can help ease overcapacity and boost profitability through synergies and increased pricing power.