National Bank of Bahrain (NBB), a majority government-owned lender, is still in discussions with Bahrain Islamic Bank for a potential offer for the Sharia-compliant lender as it looks to widen its client base and expand its reach into the Islamic banking market.
The bank “continues to undertake the confirmatory financial and legal due diligence process" into Bahrain Islamic, it said in a statement to the Bahrain Bourse, where its shares trade.
Its disclosure was followed by a statement to the exchange by Bahrain Islamic on Thursday, which said it has yet to receive a formal offer from NBB.
“Shareholders and potential investors are reminded to exercise caution when dealing in the shares” of Bahrain Islamic Bank, the lender said.
In July, NBB said it was re-initiating talks with Bahrain Islamic after it first expressed interest in a voluntary offer for the firm in October 2018, which followed an earlier legal and financial due diligence process. NBB currently holds a 29.06 per cent stake in Bahrain Islamic and last year said it had also started talks with Islamic Development Bank to acquire its 14.42 per cent stake in Bahrain Islamic.
NBB said that the ongoing discussions “may or may not lead to making a voluntary takeover offer”.
Lenders in the Arabian Gulf are increasingly looking at merger and acquisitions in a bid to gain scale and cope with tougher operating conditions against a weakening global economic backdrop. NBB’s move follows several successful mergers in the region, including the three-way tie-up between Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank in the UAE. Dubai Islamic Bank, the biggest Sharia-compliant lender in the country, is in the process of taking over its smaller rival Noor Bank, while National Commercial Bank in Saudi Arabia is pursuing merger with its competitor Riyad Bank.
Banks in the region, especially those in the UAE and Bahrain, are looking to expand their footprint both locally and internationally to gain access to new markets as they move to offset pressure in their over-banked domestic markets.
NBB plans to increase the number of branches in the UAE and Saudi Arabia and is looking to double the size of its debt capital market and advisory business to $10 billion (Dh36.72bn). It has already received approval from the Central Bank of the UAE for "reactivation" of its branch licence in Dubai, NBB chief executive Jean-Christophe Durand, told The National in July.