An examination of GCC banks recently published by AT Kearney, a financial consulting firm, concluded that the region’s banking industry will likely undergo consolidation via M&A in the face of changing conditions in the global and regional financial markets. The study foresees first the rise of “national champions”, as well as a plethora mergers between regional investment banks and retail banks. “In the long run, true regional players will emerge,” it states.
Middle East banks have been a boon for much of the decade–from 2002 to 2007, for example, banks in the UAE experienced a 39% increase in net profits and a 34% increase in total banking assets. Moreover, their assets/GDP ratio is still comparatively low in most GCC countries, which leaves room for growth. And banks are relatively tiny compared to their bigger, international-mined brethren and will ultimately need to expand externally. AT Kearney’s study notes that the banking market in the GCC is largely fragmented, as the top three banks account for just 14% of market share. “We see great potential for regional banks to consolidate and grow regionally,” said Dr. Alexander von Pock, senior manager of the Financial Institutions Group of AT Kearney Middle East. Finally, analysts point out that market conditions–specifically the dwindling market capitalizations of regional banks, as well as the large proportion of public ownership of many banks–have created a favorable environment for acquisitions.