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20 January 2020

Alizz Islamic Bank approves share swap for proposed merger with OAB

The successful completion of the proposed merger would provide Oman Arab Bank with a larger Islamic franchise and asset base, allowing the bank to improve its interest income and deposit-gathering ability.

On completion of the merger, Alizz Islamic Bank will continue to operate as a dedicated Islamic banking franchise/Bloomberg

by Kudakwashe Muzoriwa

Alizz Islamic Bank’s Board of Directors has approved a share swap ratio for the proposed merger with Oman Arab Bank (OAB).

In separate bourse filings, Alizz Islamic Bank and Oman International Development and Investment Company said that their respective Board of Directors approved a share swap ratio of around 81 per cent: 19 per cent for the shareholders of OAB and Alizz Islamic Bank respectively.

Alizz Islamic Bank’s board also recommended the lender’s shareholders to approve the merger between the two Muscat-based banks.

According to Alizz Islamic Bank, the actual swap ration will be based on the net asset value as per the audited financial statements for the year ended 31 December 2019.

Furthermore, appropriate price adjustments will be made to movements in both the banks’ financials between 31 December 2019 and the actual transaction date, said Alizz Islamic Bank’s legal adviser and company secretary.

The proposed merger and the indicative swap ration will remain subject to the approval of the shareholders, the Central Bank of Oman as well as the Capital Market Authority and other relevant authorities.

In October 2018, Alizz Islamic Bank signed an MoU with OAB for the potential merger between the two entities after obtaining the in-principal approval from the regulatory bodies.

Moody’s said that the potential merger of OAB and Alizz Islamic Bank would be credit positive for OAB and the consolidated entity will have total assets worth $7.6 billion.

OAB, with a seven per cent market share in terms of total assets (conventional and Islamic), is larger than Alizz Islamic Bank, at two per cent. However, Alizz Islamic Bank has a larger share of the Islamic assets market at 15 per cent as of the end of 2017 compared with two per cent for OAB.

On completion of the merger, Alizz Islamic Bank will continue to operate as a dedicated Islamic banking franchise with management autonomy which, according to Moodys, would help preserve the Shari’ah compliant bank’s customer relationships.

The GCC financial services industry is witnessing a wave of consolidation as banks seek ways to improve competitiveness and boost capital amid slowing economic growth.

Dubai Islamic Bank’s (DIB) takeover of Noor Bank is the latest deal nearing completion. Earlier in January 2020, DIB received shareholders' approval for the acquisition of Noor Bank through a capital increase and share swap to create a banking entity with assets of more than AED 275 billion.

The Abu Dhabi government completed the merger of Abu Dhabi Commercial Bank, United National Bank and Al Hilal Bank following the successful tie-up of its two major banks to become First Abu Dhabi Bank in 2017.

Similarly, the Central Bank of Kuwait ‘conditionally’ approved the proposed merger between Kuwait Financial House (KFH) and Bahrain’s Ahli United Bank (AUB). CBK granted KFH permission to acquire 100 per cent of the capital shares of AUB and the approval shall be conditional upon fulfilling certain requirements by the central bank.

Moody’s said that the outlook for GCC banks remains stable, except Oman, underpinned by solid economic growth as well as the banks’ strong capital buffers and substantial liquidity.

Saudi British Bank (SABB) and Alawwal also agreed to merge their businesses in June 2019, after receiving regulatory and shareholder approvals, creating the third-largest bank by assets in the Kingdom.

RELATED STORIES: Oman Arab Bank Alizz Islamic Bank Dubai Islamic Bank merger and acquisation Abu Dhabi Commercial Bank Al Hilal Bank First Abu Dhabi Bank Oman International Development and Investment Company Kuwait Financial Hous Central Bank of Oman





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