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Middle East: Arab banks lay regional plans

Arab banks used to be content to stick to their lucrative national markets. But with oil prices low, times are getting harder in the Middle East and banks are positioning themselves to go regional. Darren Stubing reports.

Bahrain: diversifying away from oil

Saudi Arabia and Kuwait: closed-economy cousins

Oil lows hit UAE, Oman and Qatar

Results for the top 20 Arab banks in 1998 were mixed and clearly reflect both regional and general emerging-market difficulties. The operating environment throughout the Gulf Cooperation Council (GCC) states - Bahrain, Saudi Arabia, Kuwait, Oman, Qatar, and the United Arab Emirates - was difficult on account of the weak oil price. Despite the recent price increase providing some respite, growth will remain subdued this year in most Middle East countries although slightly more robust in Egypt, Morocco and Tunisia.

The subdued growth prospects may precipitate banks to promote strategic corporate activity through consolidation and alliances. Already there has been action in this respect, most notably the proposed merger of Saudi American Bank (Samba) and United Saudi Bank, which, if successful, will create the fourth-largest bank in the Arab world.

Further intra-country activity is necessary in markets such as the UAE. However, the often intransigent nature of regional shareholders will continue to be one barrier. And although cross-border consolidation is a logical progression, there are significant ideological and cultural differences between markets, even in the GCC states so it will take some time.

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