Muscat-listed Alizz Islamic Bank and Oman Arab Bank, a subsidiary of Omani conglomerate Ominvest, said they are exploring the possibility of a merger, as an increasing number of regional banks opt to consolidate their operations.
The chairman of Alizz Islamic received a letter from the chairman of Oman Arab Bank requesting that the two banks “explore the possibility of a strategic collaboration that may lead to an eventual merger of the two entities”, the bank said in a statement to the Muscat Securities Market on Thursday.
The deal is subject to final approvals from the respective boards, shareholders and regulators, the statement added. Alizz, which has a market capitalisation of $200 million, said its board has agreed to proceed and explore the opportunity.
Banks in the Arabian Gulf are increasingly looking at mergers and collaborations as low oil prices in the past three years have squeezed their profit margins. Regional banks are set to see a stronger performance in the coming year as macroeconomic conditions improve, according to reports by rating agencies including Moody’s and Standard & Poor’s, but banks are still seeking cost efficiencies to drive growth.
The announcement of a possible merger between the two Omani banks comes one week after subsidiaries of HSBC and Royal Bank of Scotland in Saudi Arabia reached an initial agreement on the terms of a possible merger.
The two banks, Alawwal Bank, which is 40 per cent owned by RBS, and Saudi British Bank, said in a statement to the Tadawul stock exchange on May 16 that merger discussions were in an “advanced” stage and both lenders had reached a “preliminary, non-binding agreement”.
Shares of Alizz bank rose 5.2 per cent in early morning trading.