Banks feel little urge to merge
The aborted merger of two Gulf banks is a blow to regional consolidation, but it is only delaying the inevitable, as financial markets open up to foreign competition reports Nigel Dudley
Most analysts and senior bankers in the Middle East have agreed for more than a decade that the region needs fewer banks. And they have argued that those remaining must be either large enough to compete with international financial institutions, in providing the services demanded by corporate customers, or be small banks targeted at niche sectors.
Even though some mergers have taken place - most notably the first major cross-border deal last year which brought together the Bahrain-based Gulf International Bank (GIB) and the London-based Saudi International Bank (SIB) - neither of these goals is anywhere near being achieved. Any expectations that this long overdue restructuring had finally begun in earnest were dealt a heavy blow with the recent announcement that the proposed merger between the National Bank of Dubai (NBD) and Emirates Bank International (EBI) had fallen through.
This failure has drawn a caustic, though resigned response, from many bankers in the region and led to warnings that the region's institutions could be vulnerable to international banks creaming off the best business by offering all their services through the internet for which they do not need a local presence.