Bahrain's Al Salam Bank says in merger talks

Lender in talks with unnamed regional bank two years after Bahrain Islamic Bank tie-up collapsed

Bahrain's Al Salam Bank said on Wednesday it was in merger talks with an unnamed regional bank, almost a year after a tie-up with Bahrain Islamic Bank collapsed.

"We confirm the accuracy of the media reports that were published related to a potential merger of the bank with one of the banks in the region and the strategy for that," Al Salam said in a statement to the Bahrain stock exchange.

It provided no other details.

One potential merger prospect is Khaleeji Commercial Bank , after Gulf Finance House, which owns 47 percent of the lender, said last week it was studying tie-up options with other Bahraini banks.

In February, merger talks between Bahrain Islamic Bank and Al Salam Bank to form what would have been the Gulf Arab state's largest Islamic lender collapsed due to disagreement on valuation.

Gulf bank mergers are uncommon because main shareholders, often powerful local families, are reluctant to cede control and can demand exaggerated valuations.

However, Bahrain has seen some merger attempts in recent months as lenders react to the global financial crisis and the end of the real estate boom in the kingdom where many small banks are reliant on fees earned from managing property and land investments.

Earlier this month, Capivest, Elaf Bank and Capital Management House completed their three-way merging, creating a bank with total assets worth over US$400m.

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