Bahrain's AUB in talks to sell stake in investment firm to Kuwait's Warba Bank

Both banks are at an early stage of discussions for a potential deal

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

Ahli United Bank, a Bahraini lender, and its unit in Kuwait are in the talks with Warba Bank to sell their stake in a Kuwaiti financial investment company.

AUB and its subsidiary are in initial talks to sell their joint shareholding in Kuwait and Middle East Financial Investment Company to Warba, it said on Sunday in a statement to Bahrain Bourse, where its shares are traded.

AUB did not disclose the size of its joint shareholding in the investment company, the value of the stake or when the deal is expected to be concluded.

Kuwait-listed Warba confirmed its interest in buying the combined shareholding in a separate bourse filing to Boursa Kuwait.

The two lenders said that the talks may not result in a transaction and any potential deal will be subject to regulatory approvals.

The proposed deal follows a series of mergers and acquisitions in the financial sector of the Arabian Gulf, as banks realign their portfolios amid efforts to gain scale by combining their balance sheets. Other lenders are offloading non-core assets to cut costs and achieve operational efficiencies.

AUB is among the regional lenders looking to merge and is in talks with Sharia-compliant Kuwait Finance House for a potential tie-up that would create a new Islamic lender with $92 billion (Dh337.6bn) in combined assets.

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The two parties signed a preliminary, non-disclosure agreement on July 22 and confirmed in October last year that talks are still progressing.

“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 at the time.

The agreement in July was signed even after merger talks between KFH and AUB had stalled six months earlier over a reported difference in valuation, Bloomberg reported.

The latest to talk of consolidation are Saudi Arabia's largest lender National Commercial Bank and rival Riyad Bank, a move that could create the third-biggest bank by assets in the GCC.

NCB's plans follow Saudi British Bank and Alawwal bank’s merger announced in early 2018. Boards of the two lenders in October approved an agreement that will create a financial entity with $73bn in combined assets.

In the UAE, Abu Dhabi Commercial Bank, the second largest lender in the capital, is in talks for a possible three-way merger with Union National Bank and Al Hilal Bank, which could create the Gulf’s fifth largest banking entity with about $114bn in combined assets.