Kuwait bank seeks talks to create $92bn Islamic lender

Bloomberg

Kuwait Finance House KSCP wants to hold renewed talks with Bahrain’s Ahli United Bank BSC about a takeover, a potential boost to the island kingdom as it seeks financial support from neighbours.
Shares in Ahli United Bank, or AUB, rose 6.8 percent on Tuesday to the highest levels since April last year, valuing the Manama, Bahrain-based lender at $5.66 billion. KFH declined as much as 1.3 percent for a market value of about 3.88 billion dinar ($12.8 billion).
KFH said that it contacted AUB about “establishing a new banking entity.” Bloo-mberg News in May last year reported that the banks began talks, aiming to create an entity with about $92
billion of assets, but those talks foundered about six months ago over valuation differences.
The proposal comes as Bahrain, one of the most vulnerable Gulf Arab economies to lower crude prices, waits for financial support from its neighbours to help reduce ballooning debt and shore up foreign-exchange reserves. Bahr-ain’s social-insurance fund owns 10 percent in AUB.
“With the Bahrain government holding a lot of talks with potential official creditors, it seems plausible that Ahli United Bank has been brought back to the table,” said Richard Segal, a senior analyst at Manulife Asset Management Ltd. in London. “Governments would not ordinarily be able to access resources belonging to state pension funds, but these are unconventional times.”
Bahrain, a key Saudi Arabian ally and home to the US Fifth Fleet, hired investment bank Lazard Ltd to advise on how to repair its strained public finances, people with knowledge of the matter said earlier this month.
“KFH will benefit in the long term from gaining access to markets such as Iraq and Egypt, increased access to Oman and UK and further consolidation of presence in Kuwait,” said Joice Mathew, the head of equity research at United Securities in Muscat. “AUB should benefit from KFH’s expertise in fast-growing Islamic banking.”
Kuwait Investment Authority, the country’s sovereign wealth fund, holds a 24 percent stake in KFH and in September hired a consultant to study the feasibility of a possible merger between the two banks, the lender said at the time. Kuwait’s Public Institution for Social Security holds about 19 percent of AUB.