Oman Arab Bank, Alizz Islamic explore merger

Alizz said its board has agreed to proceed and explore this opportunity with Oman Arab Bank. (Courtesy Oman Arab Bank)
Updated 24 May 2018
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Oman Arab Bank, Alizz Islamic explore merger

LONDON: Oman Arab Bank has initiated merger talks with fellow Muscat-based Alizz Islamic Bank, as consolidation among GCC lenders continues amid sluggish economic conditions.
Oman Arab Bank, a subsidiary of investment holding company Ominvest, said on Thursday it had approached Alizz Islamic Bank earlier this week, requesting that the two banks “explore the possibility of a strategic collaboration that may lead to an eventual merger of the two entities,” Ominvest said in statement on the Muscat securities market.
Alizz, in a separate stock market statement, said it had “agreed to proceed and explore this opportunity with Oman Arab Bank.”
Alizz shares surged 3.9 percent on the news yesterday. Shares in Ominvest — whose other holdings include investment bank U Capital and Oman Real Estate Investment Services — were unchanged.
The merger talks between the banks come amid weak economic conditions in Oman, which have hit local lenders hard.
Moody’s Investors Service downgraded the sultanate’s sovereign debt rating in March, predicting that the country’s external revenues and fiscal position would continue to weaken over the coming years.
Declining oil revenues have obliged Muscat to cut spending and privatize some state assets, but such measures would have only a limited impact on the country’s finances, according to Moody’s.
Fitch Ratings last July cut the outlook on five Omani banks — Bank Muscat, HSBC Bank Oman, Ahli Bank, Bank Dhofar and Bank Sohar — to negative.
But the agency said it believed that authorities still had the ability and willingness to step in to support banks if need be.
“We believes the Omani authorities’ willingness to support domestic banks remains high, partly because of high contagion risk (small number and high concentration of banks in the system) and the importance of the banking system in building the local economy,” the agency said at the time.
Oman’s Bank Dhofar — the country’s second largest lender by assets — began merger talks with Bank Sohar in 2013, but negotiations were abandoned in October 2016 after the institutions failed to agree terms.
The merger talks between Oman Arab Bank and Alizz follows similar tie-ups in recent years by banks in Abu Dhabi, Qatar and Bahrain, as part of national economic consolidation programs coming in the wake of lower oil prices.
FGB and NBAD of Abu Dhabi completed a merger last year to form First Abu Dhabi Bank (FAB), the UAE’s largest by assets, in a move widely seen as being encouraged by Abu Dhabi’s government, which had close links to both banks.
Qatari lenders Masraf Al-Rayan, Barwa Bank and International Bank of Qatar began three-way merger talks in 2016. Bloomberg reported last mont that the deal, which was originally slated for completion last year, had stalled over price.
Saudi lenders Saudi British Bank (SABB) and Alawwal Bank last agreed to merge, in a move that would create the Kingdom’s third-biggest lender with assets of around $77 billion.
Analysts played down the impact of economic pressures on the merger, saying it was more to do with the desire of Alawwal shareholder RBS to exit the Saudi market.


RBS says Saudi bank merger boosts its core capital

Updated 16 June 2019
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.