Cyclone Gonu is not the only wind of change blowing through the Gulf - rather intriguingly, the banking and finance sector is also battening down the hatches in preparation for some uncertain times ahead. The next six to 12 months in the industry will be unpredictable and that's not really what bankers like. Being an organised, pre-planned and forward thinking lot our pin-striped friends that like to hand out loans, credit cards and mortgages faster than your average McDonald's Happy Meal vendor, are nervously looking towards what are some of the most insecure times in their GCC careers.The murmurings of uncertainty have been sparked off by the biggest merger in Gulf banking history. The US$13bn Emirates Bank International (EBI) and National Bank of Dubai (NBD) merger, set to create one of the most powerful institutions in the Gulf, will be completed in around two weeks time - and with 46 banks, 21 local and 25 foreign, in the UAE alone, ties are being apprehensively straightened and top buttons tightened as bankers prime themselves for potential merger manoeuvres.So surely with two such large players deciding to unite in such a saturated market we're going to see others join hands and compete? Interestingly, in what you would think is considered an over-banked market experts are split right down the middle on whether the EMI and NBD merger will trigger any further consolidation. Ahmed Badr, analyst at HC Brokerage is convinced that the Central Bank will not dish out any further banking licences purely because the sector is "overcrowded" and "in desperate need of consolidation".
In contrast, consulting giant AT Kearney recently suggested that Gulf banks could become victims of their own success. It proposes that imminent mergers and acquisitions may be making the headlines but that the normal factors that set off mergers are "conspicuously absent". Its analysis suggests that mergers tend to occur when the margin for organic growth is extremely tight, thus forcing participants to seek out external acquisitions instead, but the banking markets in the GCC have witnessed unprecedented growth and profitability. It adds that banking assets per capita are still relatively low in most GCC countries, leaving ample room for growth for all participants, killing off any serious merger possibilities. While certain banks might dominate the market in certain countries, no single bank stands out in the region as a whole.Regionally, the top three banks account for just 14% of market share, and to me that suggests a handful of ambitious institutions are waiting to pounce and merge or acquire given the right opportunity. Even if a series of mergers and acquisitions is not on the cards, all the Gulf countries are members of the World Trade Organisation which means they are expected to open up their banking sectors to allow foreign competition. Much like the force of a strong, unpredictable cyclone, regional banks are only shielded for a limited time from international competition. Source
No comments:
Post a Comment