HSBC, Credit Suisse to advise on Kuwait’s KFH, Bahrain’s AUB merger talks

The deal provides a non-binding framework to explore the creation of “a major regional banking institution. (REUTERS)
Updated 23 July 2018
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HSBC, Credit Suisse to advise on Kuwait’s KFH, Bahrain’s AUB merger talks

  • KFH declined as much as 1.3 percent for a market value of about $12.8 billion

LONDON: HSBC and Credit Suisse have been selected to advise on a possible merger between Ahli United Bank (AUB) and Kuwait Finance House (KFH), AUB said on Sunday.
A merger between Bahrain’s largest bank and Kuwait’s biggest Islamic lender would be the first cross-border tie-up between Gulf banks in recent years at a time when several other banks are consolidating.
HSBC and Credit Suisse were selected to complete studies to assist AUB and KFH in arriving at a fair share exchange ratio, the statement said, without specifying which investment bank was advising which lender.
If agreement on the share exchange ratio is reached, the next step would be the initiation of due diligence and other steps.
KFH said last week it had invited AUB to begin a due diligence process for a potential merger.
The deal provides a non-binding framework to explore the creation of “a major regional banking institution capable of competing more effectively in its existing and new potential markets,” AUB Chairman Hamad Al-Humaidhi said.
Separately, AUB also said its net profit for the second-quarter was $182.7 million, up 20.3 percent from a year earlier.
Shares in AUB rose 6.8 percent earlier this month to the highest levels since April 2017, and led to the Manama, Bahrain-based lender being valued at $5.66 billion.
KFH declined as much as 1.3 percent for a market value of about $12.8 billion.
Bahrain, which is a key Saudi Arabian ally and home to the US’ Fifth Fleet, hired investment bank Lazard to advise on how to boost its public finances, according to sources with knowledge of the matter.


World’s biggest sovereign fund worried about trade wars

Updated 21 August 2018
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World’s biggest sovereign fund worried about trade wars

  • The fund posted a positive return of 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter
  • Markets are worried about a trade dispute between the United States and China

OSLO: The managers of Norway’s sovereign wealth fund, the world’s biggest, expressed concern Tuesday about global trade tensions, which could heavily impact its value.
The fund posted a positive return of 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter, helping erase a loss of 171 billion kroner in January-March that was attributed to a volatile stock market.
The Government Pension Fund Global, which saw its total value swell to 8.33 trillion kroner by the end of June, manages the country’s oil revenues in order to finance Norway’s generous welfare state when its oil and gas wells run dry.
But Norway’s central bank, which runs the fund, said geopolitical and trade tensions presented a risk.
“It’s fair to say that increased trade barriers or even trade wars will not be beneficial for the fund as a long-term global investor,” Trond Grande, the deputy chief of Norges Bank Investment Management, told reporters.
Markets are worried about a trade dispute between the United States and China. Accusing Beijing of unfair competition, the US administration is considering slapping a new round of levies worth $200 billion on Chinese goods.
Talks between the two slated for Wednesday and Thursday aimed at resolving the dispute have however eased concerns somewhat.
Following US-Turkey tensions that sent the Turkish lira and the Istanbul stock market tumbling, the Norwegian fund said its assets there were worth less than the 23 billion kroner they were at the beginning of the year.
“We’ve seen the market rise for a long time, that there are different political and geopolitical events in the world that can affect the market, and we have to be prepared for the fact that (the value of) the fund can go down a lot,” Grande concluded.
The fund’s strong second quarter was attributed primarily to its share portfolio, which accounts for 66.8 percent of its investments and which rose by 2.7 percent.
Real estate holdings, which account for 2.6 percent of its holdings, rose by 1.9 percent, while bond investments, which represent 30.6 percent, remained flat.
Faced with falling oil revenues in recent years, the Norwegian government has been tapping the fund to finance public spending since 2015. But with oil prices recovering, the fund registered its first inflow in three years in June.