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"Until the dust settles it is too risky to embark on acquisitions and business combinations" Adel El-Labban, Ahli United Bank |
With many of its banks among the worst hit by the financial crisis in the Middle East, Bahrain now looks as if it might be a nucleus of GCC financial services consolidation. As elsewhere in the Gulf, there are too many banks in Bahrain considering the size of its economy. Bahrain’s economy is relatively precarious because it has smaller foreign reserves than its neighbours and the government has made large increases in expenditure in recent years. The island is also home to many banks with a regional focus.
Rich Gulf owners sometimes hold banks as trophy assets. The oil and property booms meant there was little need to consolidate. Now that those booms have ended, Bahrain’s medium-sized and small banks in particular look to be prime candidates to be swallowed by larger or more profitable rivals. This will not necessarily mean emergency mergers, although more of this is expected too – as in other countries such as the UAE and Kuwait.
Bahrain has seen at least two mergers of its smaller institutions openly discussed since the financial crisis began.
