MERGERS & ACQUISITIONS
The Case for Consolidation The banking system in the Middle East region remains highly fragmented making competition intense, creating perfect conditions for merger and acquisitions as banks positions themselves for improved economic conditions post-pandemic
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he landmark merger between the National Bank of Abu Dhabi and First Gulf Bank to create First Abu Dhabi Bank (FAB) in July 2016 sparked a deluge of consolidation in the banking sector across the Middle East. The structural characteristics of banks and financial institutions in the region are a diverse mix of conventional and Islamic entities, as well as being both retail-focused and corporate-aligned in their stance, which from a potential future merger perspective will offer value-added consolidations.
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It is worth noting that growth in the Middle East banking assets is linked to regional GDP, which moves largely in tandem with oil prices. Despite the uncertainties surrounding the trajectory of COVID-19, regional economies are on the recovery path, driven by a recovery in oil prices, supportive government spending and comprehensive economic diversification initiatives. Last November, Moody’s said that stronger government finances benefit banks’ solvency, funding and liquidity due to the governments’ dominant role as key
Banking and Finance news in the MEA market
depositors, borrowers and shareholders in the Middle East’s banking system. Two years into the pandemic, 2021 closed with a wave of deal-making some of which have been in the making for some time as banks positions themselves for improved economic conditions postpandemic. While it is still difficult to decipher how the merger and acquisition (M&A) market may evolve in 2022, there are signs of life. The second wave of deal-making could begin when the full impact of the current challenging operating environment becomes visible. Fitch Ratings said that the fragmentation in the Middle East region banking system is greater compared to other emerging markets with many banks, resulting in strong competition and weak pricing power.
Driving synergies The Middle East region’s banking system remains highly fragmented making competition intense, and the situation is expected to intensify due to the shrinking
