Oman’s Bank Dhofar Aims For Merger Talks With Bank Sohar

The new entity would have total assets worth 4.13 billion rials and a market capitalisation of around $1.76 billion.

Oman’s Bank Dhofar has approached smaller peer Bank Sohar with a view to merging to create Oman’s second-largest bank, Dhofar said on Tuesday, sending shares in both banks higher.

Bank Sohar could not immediately be reached for comment. Bank Dhofar said in its bourse filing that the deal would be dependent on Sohar being interested, as well as on both sets of shareholders and sector regulators agreeing.

The new entity would have total assets worth 4.13 billion rials ($10.73 billion), according to first-quarter financial statements, and a market capitalisation of around $1.76 billion.

Both figures would still put it significantly behind Oman’s largest lender, Bank Muscat, which has total assets and market value of 8.23 billion rials and $3.34 billion.

Currently, Bank Dhofar and Bank Sohar are the fourth and fifth-largest banks by total assets and second and seventh-largest by market value respectively.

News of the merger sent shares in Bank Sohar as much as 3.4 per cent higher in early trading on the Oman bourse, before retreating to a gain of two per cent at 0725 GMT. Bank Dhofar shares were 1.6 per cent up in limited trading.

Joice Mathew, head of research at United Securities, said the tie-up would be positive for both lenders.

“One bank is taking the initiative on this but it would be good for shareholders in terms of scale of business and reach for customers,” he said.

In February, Bank Sohar denied it had received any merger proposals from other banks, including Bank Dhofar, in response to local press reports.

While banking consolidation in a number of Gulf countries has long been called for, little has happened as major shareholders, often powerful local families, are reluctant to cede control unless they are offered high valuations.

However, in recent months, there have been a number of merger attempts, particularly in Bahrain among smaller sharia-compliant banks, thanks to the encouragement of regulators who want to strengthen lenders in the aftermath of the 2008 financial crisis.

In Oman, the executive president of the Capital Market Authority, Abdullah Salem Al Salmi, told Reuters earlier this year that he would like to see more consolidation among its 18 local and foreign-owned banks to help Omani institutions grow regionally in the long-term.

Oman has seen one bank tie-up in recent times: HSBC Holdings merged its Omani assets with Oman International Bank in June 2012 to create HSBC Bank Oman, currently the sultanate’s third-largest lender by market value.