Fitch: Mergers and Acquisitions Strengthen Kuwait's Banking Sector Amid Growth Challenges

Kuwait, 21 August, 2024 :  Kuwait's banking sector is benefiting from a surge in mergers and acquisitions (M&A), as banks seek to diversify and strengthen their financial profiles amid limited growth opportunities, according to Fitch Ratings. The M&A trend is seen as a positive development, especially in an overbanked market.

Recent deals include the potential merger between Boubyan Bank and Gulf Bank, which would create an Islamic bank with assets around KWD 16 billion ($53 billion) and a 15% market share. However, this transaction is unlikely to close before 2025.

In June, Burgan Bank acquired Bahrain’s United Gulf Bank, following the sale of stakes in its Turkish and Iraqi subsidiaries to focus on GCC markets. These moves are part of strategic shifts within the Kuwait Projects Company (KIPCO) group.

Other notable transactions include Kuwait Finance House’s (KFH) acquisition of Bahrain’s Ahli United Bank in 2022, expanding its presence regionally. KFH’s expansion strategy has been mixed, as it later sold its Bahrain unit and exited the Malaysian market.

Fitch projects modest credit growth of 3%-4% for Kuwaiti banks in 2024, limited by high interest rates, slow GDP growth, and political challenges. Despite these hurdles, Kuwaiti banks remain well-capitalized with strong liquidity and risk management, backed by the expectation of sovereign support in times of need.

Source : www.zawya.com