Gulf Bank and Kuwait’s Warba Bank have begun talks to investigate a possible merger as part of a plan to improve the long-term growth and competitiveness of the regional Islamic banking industry.
Following the announcement of the move by the two lenders in separate disclosures to Boursa Kuwait on May 26, trading in the shares of both banks was temporarily suspended for one hour in accordance with capital markets regulations.
A partnership between the two would be one of the biggest consolidations in Kuwait’s banking sector in recent memory, as lenders in the area are increasingly looking to merge to increase scale, boost productivity, and adjust to changing economic and regulatory environments.
In a statement to Boursa Kuwait, Warba Bank said, “The potential merger provides a promising strategic opportunity for growth and expansion for the two banks, leveraging their synergies and capabilities, as well as enhancing competitiveness in the local Islamic banking sector.”
It further stated that the action is being taken to optimise value for investors and shareholders in light of the current internal and external challenges brought on by regional and global economic conditions. Both institutions will start due diligence to evaluate the integration and conduct an initial feasibility study as part of the merger process.
The goal is to establish a unified banking organisation that complies with Islamic Shariah. The banks mentioned that the talks on May 25 had been communicated to the Central Bank of Kuwait.
One of its largest shareholders, Warba Bank, wrote to Gulf Bank’s chairman asking the bank to examine the possibility of a merger between the two organisations to form a single organisation, according to the bank’s own bourse filing.
“Hence, the proposal was discussed taking into consideration the bank’s efforts to explore new approaches and prospects to achieve growth and prosperity, which includes the analysis of all opportunities and means of collaboration that would lead to the realisation of our goals in terms of sustainable growth and added value for the bank, customers, and investors alike,” the Gulf Bank stated in the statement.