Wave of bank mergers in GCC ‘almost over’: S&P

The cycle of bank mergers in the Gulf Cooperation Council (GCC) over the past two years is “coming to an end”, S&P Global Ratings said in a report.

The pool of banks with common major shareholders is shrinking which will mean fewer mergers and acquisitions from now on, it added.

“Some market observers attribute the renewed interest in mergers by banks in the GCC to the less supportive economic conditions since second-half 2014, when oil prices started to drop,” said S&P Global Ratings credit analyst Mohamed Damak.

“We believe the reason is the desire to further enhance efficiency, strengthen franchises, and boost pricing power among banks with the same major shareholders. We see these operations akin to shareholders reorganizing their assets rather than genuine mergers, although the economic benefits are clear and reportedly significant,” he noted.

A new wave of acquisitions motivated by purely economic reasons could follow, S&P said, but added that it may take longer to build than the current one given the added hurdles of convincing boards and shareholders, who face the possibility of seeing their assets diluted or losing control.