Three Qatari banks begin talks for potential mega $44bn merger

Qatari banks Masraf Al Rayan, Barwa Bank and International Bank of Qatar (IBQ) have initiated talks about a potential merger that could lead to it becoming the country’s second largest bank.

If the deal goes ahead as planned, it will be a rare occasion when banks in the region merged together.

Banks have usually been reluctant to launch joint institutions, but are now forced to consider doing so following lower oil prices, reported Reuters.

A joint statement by the three banks said ‘initial discussions have started to create a larger and stronger financial institution with a solid financial position and liquidity to support Qatar’s economic growth.’

The new bank will be run in compliance with Islamic banking principles and will have assets worth more than QR160bn.

Masraf Al Rayan is already Qatar’s second-largest bank in terms of market capitalization. In September, it had assets worth QR87bn.

Both Rayan and Barwa Bank are Islamic institutions, but IBQ currently follows conventional banking principles.

Since Qatari regulations do not allow a lender to operate both standards, IBQ will have to convert its business to being sharia-compliant should the deal go ahead.

Consolidation has long been talked about in the Qatari banking sector given that 18 local and international commercial banks serve a population of 2.6 million. However, reluctance among local shareholders to cede control, given the prestige of owning a bank, plus buoyant local economic conditions in recent years, have prevented tie-ups.

Though negotiations have begun, there is no guarantee any agreement will be reached. The last time a bank merger was attempted in Qatar, between Al Khalij Commercial Bank and IBQ, it collapsed in June, 2011, after more than a year of talks.