Gulf Finance House says it is seeking to merge Khaleeji Commercial Bank (KCB) with another Bahraini bank, becoming the latest lender in the kingdom eyeing consolidation.
The announcement by the Manama-based Islamic investment bank, which owns a 47 per cent stake in KCB, comes as Bahrain's banking sector is forced to consolidate.
“GFH is currently studying a number of options to merge Khaleeji Commercial Bank … with other banks in Bahrain to create a bigger and stronger bank,” it said. “GFH is considering the acquisition of a number of assets in [Saudi Arabia] and UAE that will generate high secured yields.”
GFH shares fell 3.8 per cent to US$0.125 in Bahrain yesterday following the announcement.
The move follows a rare three-way merger completed this month by Capivest, Elaf Bank and Capital Management House.
Bahrain's banking sector has faced difficulties as the economy stagnated last year amid prolonged political unrest stemming from the Arab Spring.
Considered the crown jewel of GFH’s portfolio, Khaleeji Commercial Bank generated net income of 120,000 Bahraini dinars (Dh1.1 million) during the first nine months of last year, a 51.6 per cent decrease on the same period the year earlier. The bank’s financial statements for the full year are yet to be released.
The bank has sought to free up capital to invest in other assets to support its core businesses, said the chief executive Hisham Alrayes in May, after a restructuring agreement for $110m (Dh404m) of sukuk debt.
Last year, GFH Capital, a Dubai-based subsidiary of GFH, completed an acquisition of Leeds United Football Club.
GFH Capital hopes to return Leeds United, now in the Championship, to the English Premier League in an effort to avail itself of increased revenues from a renegotiation of television broadcasting rights.
“We remained wary of GFH’s ability to carry on as a going concern given its continued inability to produce cash from its core operations,” analysts from Exotix, which invests in distressed debt, wrote in a recent research note. “It is still unclear whether the company has successfully restructured its US$100m loan facility, and we doubt GFH’s negative free cash flow trend has reversed over the last quarter.”
In the meantime, rival Bahraini investment firm Investcorp has completed a string of deals this month. It yesterday said it had acquired FishNet, an internet security provider.
Investcorp paid “slightly above” $200m for the company, Mohammed Al Shroogi, the firm’s president for the Arabian Gulf, told Reuters.