Low oil prices and the coronavirus pandemic have increased the financial pressure on banks in the Gulf region, which will be looking at more mergers and acquisitions opportunities at times of decreased profitability, Moody’s Investors Service said in a report on Tuesday.
The six countries in the Gulf Cooperation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, are major producers of oil and gas, and their economies have suffered from the double whammy of the crash in oil prices and the COVID-19 pandemic.
This GCC group of countries comprises OPEC’s top producer Saudi Arabia, the third-largest producer, the UAE, and the fourth-biggest OPEC producer, Kuwait.
The report said, “The banks now face larger cost adjustments as low oil prices and the coronavirus fallout constrain growth opportunities and severely dent their profitability.
“This is prompting a new wave of mergers as banks seek ways to combat revenue pressure.”
Financial considerations, especially among smaller banks, it said would be the key motivator of the rising number of merger deals in the region’s banking sector.
Saudi Arabia has lined up a $15.6bn takeover bid from National Commercial Bank, Saudi Arabia’s largest lender by assets, for rival Samba Financial Group.
