Finance & Capital Market

Qatari banks Barwa, IBQ set for big merger

Mirroring a trend seen across the GCC region, two lenders in Qatar have announced the country’s first bank merger in a move officials say will support economic growth and the development of the financial and private sectors.
 
The duo had signalled the finalisation of negotiations and clearance of regulatory requirements necessary to consolidate operations, according to Oxford Business Group (OBG). 
 
This merger has resulted in the consolidation of an Islamic bank – Barwa Bank – with conventional IBQ, with the new institution offering sharia-compliant services, it stated.
 
The merged entity, which will operate as Barwa Bank, will have total assets of more than QR80 billion ($22 billion) and a shareholder equity base of over QR12 bllion ($3.3 billion).
 
The tie-up is a significant step forward for Qatar’s banking industry, remarked Sheikh Mohammad bin Hamad bin Jassim Al Thani, the chairman and managing director of Barwa Bank.
 
"This merger… is a momentous milestone for the local banking sector, regional mergers and acquisitions (M&A) landscape, and sharia-compliant banking industry,” he said when announcing the finalisation of the deal.
 
Sheikh Mohammad said the merger will create the third-largest Islamic and sixth-largest overall bank in Qatar, with the consolidated lender having a 5% share of the market, according to ratings agency Moody’s. 
 
The new bank, which will also be the ninth-largest sharia-compliant lender in the GCC, is expected to benefit from lower funding costs and improved profitability, it stated.
 
Qatar’s banking sector is undergoing broader changes, as well, including a shift towards digital banking, which will likely see a reduction in branches and physical presence in the coming years, 
 
This will impact all aspects of the industry, from retail and private banking, to investment and international banking, according to Raghavan Seetharaman, CEO of Doha Bank, and could prompt further consolidation in the sector.
 
“Consolidation is a game-changer in the market,” Seetharaman told OBG. “Globalisation and new cost structures, as well as digitalisation and consumerism, are pushing banks to redefine the business model in order to address pressures and sustain growth,” he added.
 
According to OBG, the mergers are being utilised throughout the GCC to shrink operational and funding costs, improve profitability and reinforce asset bases and risk-management capacity amid tighter market conditions and slower economic growth.
 
Across the region, banking sector consolidation is also strengthening efforts to reduce vulnerability to unpredictable oil prices and shift from economies dependent on hydrocarbons to knowledge-based markets driven by private sector development, it added.-TradeArabia News Service