Kuwaiti lenders Warba, Gulf Bank explore merger to boost competitiveness

27/05/2025 02:03 AST

Kuwait's Warba Bank and Gulf Bank have entered discussions to explore a potential merger as part of a strategy to enhance long-term growth and competitiveness in the local Islamic banking sector.

The two lenders announced the move in separate disclosures to Boursa Kuwait on May 26, prompting a temporary one-hour suspension of trading in both banks' shares in line with capital markets regulations.

A tie-up between the two would mark one of the most significant consolidations in Kuwait's banking industry in recent years, as lenders in the region increasingly pursue mergers to achieve scale, drive efficiency, and adapt to evolving regulatory and economic conditions.

In a statement to Boursa Kuwait, Warba Bank said: "The potential merger provides a promising strategic opportunity for growth and expansion for the two banks, leveraging their synergies and capabilities, as well as enhancing competitiveness in the local Islamic banking sector."

It added that the move comes in light of current internal and external challenges posed by local and global economic conditions, with the aim of maximizing value for shareholders and investors.

As part of the merger process, both institutions will undertake a preliminary feasibility study and begin due diligence to assess the integration. The aim is to form a single banking entity compliant with Islamic Shariah principles.

The banks noted that the Central Bank of Kuwait had been informed of the discussions on May 25.

In its own bourse filing, Gulf Bank stated that its chairman received a letter from Warba Bank - one of its major shareholders - requesting the bank to consider the feasibility of a potential merger between the two institutions to create a unified entity.

"Hence, the proposal was discussed taking into consideration the bank's efforts to explore new approaches and prospects to achieve growth and prosperity, which includes the analysis of all opportunities and means of collaboration that would lead to the realization of our goals in terms of sustainable growth and added value for the bank, customers, and investors alike," the Gulf Bank stated in the statement.

The merger talks come amid a challenging global economic landscape marked by rising trade tensions and market volatility. In April, S&P Global Ratings said that banks across the Gulf Cooperation Council remain well-positioned to weather external shocks.

In its report titled "GCC banks can cope with the fallout from intensifying trade tensions," the agency pointed to the region's robust financial buffers as protection against evolving global risks.

"GCC banks appear to be in a good position to withstand these threats," the report stated at that time, citing "robust liquidity levels, solid profitability, and healthy capitalization" as the sector's core strengths.

While the direct impact of trade tensions on GCC economies is expected to remain limited due to minimal export exposure to the US, S&P warned of potential indirect effects. A prolonged downturn in oil prices, for instance, could dampen fiscal spending and sentiment.

The ratings agency has revised its average Brent oil price assumption for 2025 to $65 per barrel.

Arab News