Oman’s Ahli Bank rejects merger offer from Bank Dhofar

Oman’s Ahli Bank has rejected an offer for a potential merger from Bank Dhofar, a deal that was expected to create an entity with more than $19bn in assets.

The bank’s board of directors studied the non-binding proposal from Bank Dhofar and decided not to accept it. “We would like to inform you that the board of directors has studied the proposal and decided not to accept it,” Ahli Bank said in a bourse filing without providing a reason for the board’s decision.

Bank Dhofar announced that it planned to submit a non-binding offer for its smaller competitor, which is partly owned by Bahrain’s Ahli United Bank earlier this week. Ahli Bank also acknowledged that it had received an offer to combine with Dhofar on Tuesday.

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Muscat-based Bank Dhofar has $11.2bn in assets while its smaller competitor, which is partly owned by Bahrain’s Ahli United Bank (AUB), has just under $8bn in assets.

The bank has attempted to merge with other local lenders in the past with no success. It was previously in talks to merge with the National Bank of Oman, but the negotiations were called off in 2019.

Oman bank merger and acquisitions

Meanwhile, Sohar International Bank received the central bank’s approval to merge with HSBC Bank Oman in February and the deal is expected to close in the second half of this year. Sohar International is also linked with a potential merger with Omani Islamic lender Bank Nizwa. Both proposed mergers are subject to regulatory and shareholder approval.

Read: Sohar International eyes merger with HSBC Bank Oman

Fitch Ratings said the fragmentation in the GCC region’s banking system is greater compared to other emerging markets, with many banks resulting in strong competition and weak pricing power.

The merger and acquisition (M&A) activity in the region is and will continue to be a driver of transformation in the financial sector as incumbents look for strategic partnerships and consolidation opportunities to boost digital capabilities, counter the disruption from digital attackers and address sustained pressure from regulators.

In March, Standard Chartered Bank entered into an agreement with Arab Jordan Investment Bank (AJIB), subject to central bank approval, which will see the London Stock Exchange-listed lender sell its corporate, commercial and institutional banking, consumer lending and private banking businesses in Jordan to AJIB.

The scale achieved from bank mergers in the GCC is leading to improved liquidity management, enhanced profitability and reduced inefficiencies with better cost-to-income ratios. Kuwait Finance House completed its acquisition of Bahrain’s AUB in October 2022 – a rare cross-border tie-up that had been almost four years in the making.

Read: Kuwait lender KFH to buy Bahrain’s Ahli United for $11.6bn

The structural characteristics of banks in the Gulf region are a diverse mix of conventional and Islamic entities, as well as being both retail-focused and corporate-aligned in their stance, which from a potential future merger perspective will offer value-added consolidations.