Ahli United Bank and KFH say merger talks 'still ongoing'

Parties appointed banks in July to undertake valuations for a deal

Board of KFH and AUB have approved final share exchange ratio. Andrew Henderson / The National

Ahli United Bank, the Bahraini lender, and Kuwait Finance House are still in discussions for a potential merger, which would create a new Islamic entity with $92 billion (Dh337.6bn) in combined assets.

The two parties signed a preliminary and non-disclosure agreement on July 22 to appoint banks to undertake valuations required to explore the possibility of a tie-up.

“With reference to our earlier disclosures … please note that consultations are still under way regarding the valuation results of the studies prepared by HSBC and Credit Suisse to recommend and determine a fair share exchange ratio,” Ahli United said in a statement on Sunday to Boursa Kuwait, where its shares are traded.

The agreement in July was signed even after merger talks between KFH and Ahli United had stalled six months earlier over a reported difference in valuation between the two financial institutions, Bloomberg reported at the time.

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GCC banks are increasingly eyeing consolidations to build scale and achieve efficiencies in a competitive market after a three-year oil price slump had caused bank profits to slide – although they are now recovering.

In May, Saudi British Bank and Alawwal Bank agreed to $5bn merger deal to create the kingdom's third-largest lender. Last year, First Abu Dhabi Bank, the largest bank in the UAE, was created after merging National Bank of Abu Dhabi and First Gulf Bank.

More recently, Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank have announced plans to tie-up, while Oman’s Bank Dhofar and National Bank of Oman are also set to merge.

Ahli United was established in Bahrain in 2000 following a consolidation of United Bank of Kuwait and Al Ahli Commercial Bank. It operates under a licence from the Central Bank of Bahrain.