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Middle East: M&A shakes up regional banking

Bank M&A in the Middle East has accelerated over the past year. Although regional events and global markets are already throwing up tests, the motivation for deals is still stronger than ever.

With regional investment banking revenues reaching a three-year high in the 12 months to mid 2013, the banking sector is a big part of the Middle East M&A story. It is fulfilling a much-needed and long-awaited trend, particularly for banks in the Arab Gulf.

Having largely missed the growth spurt of other emerging regions in the years after the 2008 crisis, banks in the Middle East are now looking to consolidate, and not just in the home market. They are also looking to expand to sub-Saharan Africa, Asia, north Africa, the Levant and Turkey.

"There is a new decisiveness among Middle Eastern banks about international acquisitions," says Klaus Froehlich, head of investment banking for Middle East and Africa at Morgan Stanley.

Froehlich mentions banks from UAE and Qatar expanding their international businesses to regions surrounding the Gulf, sometimes buying banks from European groups. "Qatari banks are cash rich, and there is only so much they can grow in Qatar," he says.

In Dubai, banks are similarly looking to expand and buy abroad. Dubai is not blessed with the energy wealth of such Gulf states as Qatar. But as in other Gulf states, its banks have tidied their balance sheets after the 2008 and 2009 regional crash, allowing them to think again about growth.

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