Kuwait Finance House wants to merge with Ahli United Bank

Kuwait Finance House is seeking a potential merger with Bahrain’s Ahli United Bank, reviving earlier talks for a deal that would create a new Islamic lender worth $92 billion (Dh337.6bn) in combined assets.

The Kuwaiti lender has invited Al Ahli United Bank to sign a memorandum of understanding and a non-disclosure agreement to begin valuations to explore the possibility of unifying the businesses and assessing the feasibility of creating a new bank, KFH said yesterday.

The move is in line with KFH’s aim “to seek strategic opportunities for regional and international growth and expansion”, it said in a statement to Kuwait bourse, where its shares are traded.

The letter comes six months after KFH’s talks with AUB stalled over a difference in valuation between the two financial institutions, according to Bloomberg.

A three-year slump in oil prices has resulted in several bank mergers in the Arabian Gulf as the lenders try to build scale and compete better in a tough market conditions.

The Middle East recorded a 62 per cent increase in merger and acquisition deal values in the first half of this year compared to the same period in 2017, according to a report released yesterday by law firm Baker McKenzie.

In May, Saudi British Bank and Alawwal Bank agreed to $5bn merger deal to create the kingdom’s third-largest lender.

Last year, First Abu Dhabi Bank, the largest bank in the UAE, was created after merging National Bank of Abu Dhabi and First Gulf Bank.

KFH said the valuation studies may not necessarily lead to a merger agreement and is subject to regulatory approval by authorities in both countries.

The Kuwaiti bank holds 17.36bn dinars (Dh210bn) in assets as of end of 2017 and Al Ahli United Bank had $33.24bn.

Shares of KFH rose 1.6 per cent, while those of Al Ahli Bank inched up 0.8 per cent yesterday.