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.


US tariffs trigger WTO spat escalation

Updated 7 min 20 sec ago
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US tariffs trigger WTO spat escalation

GENEVA: China, Russia and the European Union are among a string of countries asking the World Trade Organization to probe new US steel and aluminum tariffs, the world trade body said Friday.
Washington is meanwhile calling the WTO to investigate a number of retaliatory duties imposed by a range of countries, the agenda for the next meeting of the organization’s Dispute Settlement Body (DSB) showed.
The agenda for the DSB meeting set to be held on October 29 shows that the EU, China, Russia, Canada, Mexico, Norway and Turkey plan to ask for the creation of a panel of experts to review US President Donald Trump’s decision to hit them with tariffs of 25 percent on steel and 10 percent on aluminum.
Marking a departure from a decades-long US-led drive for free trade, Trump has justified the steep tariffs with claims that massive flows of imports to the United States threaten national security.
The tariff spat has escalated into an all-out trade war between the US and China and growing trade tensions between Washington and many of its traditional allies.
The US is meanwhile planning to request that the DSB create another set of expert panels to review the legality of retaliatory tariffs imposed by China, Canada, the EU and Mexico.
The requests, which follow rounds of failed consultations, mark and escalation in an ongoing showdown at the WTO around Trump’s controversial trade policies.
Under WTO regulations, parties in a dispute can block a first request for the creation of an arbitration panel, but if the parties make a second request, it is all but guaranteed to go through.
“Once the panel is established and composed, the EU is ready to demonstrate that the United States’ import duties are WTO-inconsistent and to obtain a ruling that condemns the US and brings relief to the EU industry,” an EU Commission spokesperson said.
The creation of a DSB panel usually triggers a long and often costly legal battle that sometimes takes years to resolve.