Gulf-region Islamic banks are joining forces to better compete.
A wave of mergers is transforming the banking sector in the Gulf Cooperation Council (GCC) states, reshaping both conventional banks and Islamic financial institutions. The Islamic banking sector faces a difficult environment, with growth forecast in the low single-digit range, according to Standard & Poor’s. A number of Islamic institutions have announced mergers, such as Dubai Islamic Bank’s plans to acquire Noor Bank, creating an institution with some $75 billion in assets. Global Finance’s top-ranked Islamic bank, Kuwait Finance House, has proposed buying Bahrain-based Ahli United Bank, the parent of Ahli United Bank (Kuwait); the combined entity would have approximately $98 billion in assets.
Islamic banks have benefitted from rapid growth of Islamic products—in some cases outgrowing conventional banks. According to the 2018 Islamic Banking Index, 55% of UAE consumers hold at least one Islamic banking product, compared to 47% in 2015. Meanwhile, the conventional bank penetration rate fell to 63% from 69% in 2017. Demand for shariah-compliant Sukuk bonds is growing, with…