Gulf banks have sufficient resources to create giant financial units capable of competing globally but they face legislative obstacles and other hurdles in any plan for merger or acquisition, according to a regional banker.
George Nasra, CEO of the International Bank of Qatar, said the total value of acquisitions and mergers among banks in the Gulf Cooperation Council (GCC) has reached only about $15 billion (Dh55bn) over the past five years.
The bulk of that value involved EmiratesNBD, which was created from the merger of the National Bank of Dubai and Emirates Bank International, the largest integration of two regional financial units in many years.
“Gulf bank mergers face major obstacles, including local legislations and laws that restrict the ratio of ownership to be acquired and failure of banks to agree on an acceptable merger formula and on the name of the new bank after merger,” Nasra told a banking conference in Abu Dhabi on Monday.
“Other obstacles involve the formation of the board of directors, the headquarters of the new bank and some challenges to the merger process itself.”
Nasra said he believes the global financial crisis has created a good opportunity for mergers among regional banks but added that that “views and opinions still largely vary about the mechanism to achieve this.”
He said most regional banks had nearly recovered from the crisis but that they would have to allocate more funds for loan loss provisions this year.
He said recovery signs are reflected in a steady growth in the banks’ assets, which have climbed to pre-crisis levels. His figures showed the combined assets of the GCC’s largest 25 banks have now peaked at around $860bn. “Although this is a positive development, these banks still lack the required large size…for example, the combined assets of the Arab World’s 10 largest banks are far below those of Spain’s Banco Santander, the world’s 13th largest bank with its current assets standing at nearly $1,592bn compared with about $529bn for those 10 Arab banks,” Nasra said.