Why Gulf Banks Are Merging Like Never Before: QuickTake - Bloomberg

Why Gulf Banks Are Merging Like Never Before: QuickTake - Bloomberg:

Lenders in the Persian Gulf have been rapidly consolidating as they seek to stay competitive in an era of lower oil prices. Saudi Arabia’s biggest bank announced talks about a mega-merger with a domestic rival less than a year after the kingdom’s first such tie-up in 20 years. Abu Dhabi is working on a merger of three of its banks, potentially the emirate’s second in just over a year. And the wave continues: About a dozen other regional lenders are involved in takeover or merger talks.

1. Why are banks merging?

Regional lenders are heavily reliant on government deposits, and those have been dwindling in sync with crude prices. At the same time, the six-nation Gulf Cooperation Council -- Saudi Arabia, Qatar, the United Arab Emirates, Oman, Kuwait and Bahrain -- is heavily over-banked. There are about 70 listed banks in the region, according to data compiled by Bloomberg, serving a population of around 51 million. Although hardly an exact comparison, there are only about a dozen listed banks in the U.K., a country of roughly 65 million people.