More bank mergers, acquisitions forecast for GCC - analysts

NATIONAL CHAMPIONS: AT Kearney predicts a build up of 'national champions' to be driven by major shareholders as was the case with Emirates NBD.

The GCC banking sector will see a wave of mergers and acquisitions post-crisis, management consultancy AT Kearney predicts.

While regional banks have so far largely shunned major mergers and acquisitions, changing conditions in the global and regional financial industry have created opportunities for a long-predicted wave of mergers, the firm said in a report.

“Consolidation is gathering momentum driven by structural, market and regulatory factors,” said Middle East managing director Dirk Buchta.

“Moreover, the declining market capitalisation of regional banks in the wake of the financial crisis has created favourable conditions for acquisitions and the large proportion of public ownership in some of the banks may also facilitate takeovers. Local banks should start now to prepare for the challenges ahead.”

The GCC banking market is fragmented and the top three banks have a joint market share of just 14 percent.

“GCC banks are still small compared to the big international banks and eventually will need to grow externally to compete. Banks need to proceed carefully, though, as most mergers fail to meet their objectives due to poor planning or execution,” said Alexander von Pock, senior manager at AT Kearney’s Financial Institutions Group.

The study expects a build up of “national champions” to be driven by major shareholders, as was the case with Emirates NBD.

At the same time, regional investment banks may seek to diversify and merge with retail banks.

“In the long run, true regional players will emerge,” von Pock said.

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