Kuwait’s KFH explores Saudi M&A deals in regional expansion drive

Kuwait Financial House (KFH Group) said that it is “conducting careful studies” for potential expansion opportunities into Saudi Arabia following a report that the banking group was considering buying a majority stake in Saudi Investment Bank.

“KFH confirms that it is still studying the available opportunities in more than one bank, and no memorandum of understanding or any agreement has been signed with any bank in Saudi Arabia,” the Kuwaiti lender said in a bourse filing on Tuesday.

The bank said a study into the potential acquisition of a stake in the Saudi Investment Bank, as well as other studies to expand its regional footprint, “contributes to supporting KFH’s growth”.

Sources familiar with the matter told Bloomberg that KFH has been studying a potential investment to help bolster its regional presence. The banking behemoth completed its merger with Ahli United Bank—Kuwait in February, following its $11.6bn cross-border acquisition of Ahli United Bank—Bahrain in July 2022.

The Kuwaiti lender’s quarterly net profit rose marginally by 0.5 per cent to $529.6m (KWD162.8m) compared to KWD162.1m for the same quarter a year ago, driven by an increase in income generated from the main activities of the banking group.

Operating revenue for the first three months of the year came in at KWD392.4m, up 3.5 per cent from KWD379.1m in the same period of 2023. KFH’s total assets rose by 0.5 per cent to KWD37bn.

Deliberations between KFH and Saudi Investment Bank, a bank with a market capitalisation of $4.4bn (SAR16.3bn), are reportedly ongoing but there is no certainty that they will result in a deal. The Saudi lender previously counted JPMorgan Chase as one of its biggest shareholders until the US bank sold off its stake in 2018.

Consolidation continues to be an essential part of the transformation journey across the GCC region’s banking system and has the potential for further synergies in creating banks with greater scale to support National Visions and in terms of revenue and cost synergies.

McKinsey said, in a February report, that mergers and acquisitions (M&A) remains a high priority for financial services players heading into the mid-2020s. Most financial services executives across Europe, the Middle East, and Africa (EMEA) expect M&A to remain a high priority for banks to maintain or gain momentum.

Earlier in May, UAE’s First Abu Dhabi Bank (FAB) was linked with a possible acquisition of Turkish conglomerate Koc Group’s 61.2 per cent stake in Istanbul-based lender Yapi Ve Kredi Bankasi (Yapi Kredi).

However, a deal between FAB and Yapi Kredi was hampered by disagreements over price.

Bahrain’s Al Salam Bank also completed the acquisition of KFH Bahrain from KFH Group in May, marking the Islamic lender’s fifth M&A transaction in Bahrain. The deal is expected to increase Al Salam’s balance sheet by 28 per cent, accelerate market share acquisition, and enhance offerings.

Read: UAE’s FAB reportedly in advanced talks to acquire Yapi Kredi