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.


Infectious diseases are set to become as great a risk for global business as climate change

Updated 19 January 2019
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Infectious diseases are set to become as great a risk for global business as climate change

LONDON: The Global Risks Report 2019 jointly compiled by the World Economic Forum (WEF) and the Harvard Global Heath Institute describes a world that is woefully ill-prepared to detect and respond to disease outbreaks.
In fact, the world is becoming more vulnerable to pandemics, despite advances in medicine and public health.
Global GDP will fall by an average of 0.7 percent or $570 billion because of pandemics — a threat that is “in the same order of magnitude” to the losses estimated to be caused by climate change in the coming decades.
“Outbreaks are a top global economic risk and — like the case for climate change — large companies can no longer afford to stay on the sidelines,” said Vanessa Candeias, who heads the committee on future health and health care at the WEF.
Potential catastrophic outbreaks of disease occur only every few decades but regional and local epidemics are becoming more common. There have been nearly 200 a year in recent times and outbreaks of diseases such as influenza, Ebola, zika, yellow fever, SARS, and MERS have become more frequent over the last 30 years.
At the same time antibiotics have become less effective against bacteria.
The impact of influenza pandemics is estimated at $60 billion, according to a report by the Commission on a Global Health Risk Framework for the Future — more than double previous estimates.
The trend is expected to get worse as populations increase and become more mobile due to travel, trade or displacement. Deforestation and climate change are also factors.
Businesses need to bone up on the risk of infectious diseases and how to manage them if the overall economy is to remain resilient.
Peter Sands, research fellow at the Harvard Global Health Institute and executive director of the Global Fund to Fight Aids, Tuberculosis and Malaria, said, “When business leaders are more aware of what’s at stake, maybe there will be a different dialogue about global health, from being a topic that rarely touches the radar screen of business leaders to being a subject worthy of attention, investment and advocacy.”
Predicting where and when the next outbreak will come is an evolving science but it is possible to identify certain factors that would leave companies vulnerable to financial losses, such as the nature of the business, geographical location of the workforce, the customer base and supply chain.
Disease is not the only threat. There is also fear uninformed panic. Past epidemics have shown that misinformation spreads as fast as the infection itself and can undermine and disrupt medical response.
The report advises planning for such emergencies by “trusted public-private partnerships” so that “businesses can help mitigate the potentially devastating human and economic impacts of epidemics while protecting the interests of their employees and commercial operations.”
It is estimated that the outbreak of Ebola in West Africa in 2014-2016 cost $53 billion in lost commercial income and the 2015 MERS outbreak in South Korea cost $8.5 billion. According to the World Bank, disease accounts for only 30 percent of economic losses. The rest is largely down to healthy people changing their behavior as they seek to avoid becoming infected themselves.
The authors of the report will make recommendations next week at the World Economic Forum annual meeting in Davos.