IslamicFinance.de

With the room for further organic growth being limited, mergers and acquisitions should be considered as an avenue for sustained growth, says A.T. Kearney.
According to A.T. Kearney, the global financial crisis has put an end to the heydays of growth in the banking sector and the current market outlook suggests that these days are not returning quickly. Islamic banks, which traditionally grew faster than their conventional peers, are also affected.
The global financial crisis highlighted the need for consolidation in the Islamic banking industry in the region. Growing out of their niche and becoming mainstream business is considered one of their major challenges and if Islamic banks do not succeed, the room for further organic growth is limited as the market space in some GCC countries is already overcrowded.
In recent news some Central Banks in the GCC – notably Kuwait and UAE – are urging banks to consider mergers to strengthen the banking sector. This sentiment is obviously shared by a number of high-ranking regional bankers, who have either expressed interest in mergers and acquisitions to counter competition or commented on the favorable conditions for acquisitions. More importantly, the first domestic Islamic banking acquisition in the MENA region in years has recently been concluded, where an Islamic bank in Bahrain has acquired a conventional bank with the intention to convert the target into a Sharia-compliant business and Dubai Islamic Bank has increased its stake in Tamweel.