The Qatari banks have announced that they are currently under discussion for a potential merger.
Masraf Al Rayan, Barwa Bank and the International Bank of Qatar issued a joint-statement this Monday, saying that the three have begun initial talks for a potential merger into what could result in the Gulf state’s second-largest bank.
Gulf banks have not been generally keen on consolidating, but with lower global oil prices, banks have been trying to challenge the resulting impact of the region’s economy.
In a statement the three Qatari banks sent to Reuters, they said that they are under discussion “to create a larger and stronger financial institution with a solid financial position and liquidity to support Qatar’s economic growth”.
Even though not all three bank follow Islamic banking principles, if the merger goes through, the new mega-bank will be operated on an Islamic banking system. Together, they would control assets worth more than QAR 160 billion, or $44 billion.
Masraf Al Rayan is already Qatar’s second-largest bank market capitalisation and the largest Qatari constituent in the MSCI Emerging Markets index. It controls and operates assets worth over QAR 87 billion as of September 30 this year, according to their own financial statement.
And while both Masraf Al Rayan and Barwa Bank are Islamic banking institutions, the International Bank of Qatar operates under a rather conventional banking system. However, Qatari regulations would not allow the new bank to operate under both systems, meaning that the IBQ would have to convert to sharia-based business methods.
There are still no final go for the merger, but it could be a solution out of recent plunges in the oil markets. Qatar’s small population of 2.6 million people are served by 18 local and international commercial banks, a large number to a relatively small population.