Bahrain-based Ithmaar Bank said it plans to boost its stake in the Bank of Bahrain and Kuwait (BBK) by swapping the new BBK shares with its Shamil Bank, effectively merging the two lenders.

Ithmaar Bank currently owns 25.4 per cent of BBK shares, said a statement from the bank.

Under the swap deal, BBK will issue additional shares to Ithmaar Bank in consideration for a 100 per cent stake in Shamil Bank of Bahrain, presently a wholly owned subsidiary of Ithmaar Bank.

This will see BBK issue an undisclosed number of new shares to Ithmaar in exchange for a 100 per cent stake in Ithmaar's Shamil Bank of Bahrain.

According to experts, BBK and Shamil are expected to benefit from the singularly powerful synergy - with extended coverage, diversified offerings, consolidated financial strength and improved customer service across the board - that will be created.

This will also contribute, directly, to reinforcing Bahrain's position as the regional financial hub.

During its meeting last month, the board of Ithmaar Bank resolved to offer the shareholders of BBK, through their board, the opportunity to acquire 100 per cent stake in Shamil Bank against issuing additional BBK shares.

'If and when the proposal is finalised by the boards of Ithmaar Bank and BBK, it will be subject to approval from the shareholders of both banks, and will be implemented in accordance with the rules and regulations of the kingdom,' the Ithmaar Bank statement said.

The board of both banks are expected to call for extraordinary general meetings to discuss the proposal and work closely with the industry and commerce ministry, the Central Bank of Bahrain and the Bahrain Stock Exchange to ensure compliance at every juncture.

'Once the share swap is complete, the new entity will be able to deploy the combined strengths of two of the kingdom's prominent banks. This plan sets the stage for a promising, and certainly the most exciting, change in Bahrain's financial landscape.

'Combining the core strengths of both banks, BBK and Shamil, will pool already significant resources and, in addition to the obvious competitive advantages and the subsequent economies of scale, it will also build a strong capital base capable of facing unforeseen market conditions, and respond to economic changes,' the statement added.

With improved financial strength and extended branch and ATM networks as well as other delivery channels, the merged entity will be uniquely positioned to realise the tremendous opportunities that are now being created, the bank said.

'This, in turn, will bring significant returns to the shareholders and clientele, as well as contribute towards further developing Bahrain's financial sector and reinforcing the kingdom's position as the regional banking hub,' it added.-TradeArabia News Service