Oman’s Bank Nizwa Aims For 2015 Merger With United Finance Co

Omani Islamic lender Bank Nizwa hopes to complete a merger with United Finance Co in 2015 as it aims for faster growth in the country’s crowded banking sector, the bank’s chief executive told Reuters on Thursday.

The potential deal is the latest sign of consolidation after the start of merger talks in 2013 between Bank Dhofar and Bank Sohar.

Oman’s financial regulator has been looking at ways to limit the number of lenders in the country; at present, there are around 18 banks for a population of 4 million people.

“The regulators would like to see some consolidation. But our incentive is to grow quicker,” said Jamil Al Jaroudi. Bank Nizwa is Oman’s eighth largest lender by assets.

“We hope it will come to fruition in 2015. We are a new bank and when you think strategically, it allows you to grow more quickly.”

The last banking merger to be completed in Oman was in 2012, between the local business of HSBC Holdings and Oman International Bank.

United Finance, which offers loans and leasing services as well as corporate deposits, said at the start of this week that it had agreed in principle to merge with Bank Nizwa and would consider the proposal when its board next met.

Bank Nizwa, which started operations in 2013 and is one of Oman’s two full-fledged Islamic banks, has a market capitalisation of $316 million, according to Thomson Reuters data. United Finance has a capitalisation of $107 million.

SUKUK

Oman’s fledgling Islamic finance industry is expected to receive a boost when the government implements plans to issue its first sovereign sukuk. Minister for Financial Affairs Darwish al-Balushi said in October that might happen in the first quarter of 2015.

But Jaroudi said on Thursday that the issue, expected to be 200 million rials ($520 million), might be pushed back from the first quarter following the plunge of oil prices.

“Everyone was overwhelmed by what happened with oil prices so it may have been delayed a little bit, and I don’t know when it will be – but it will be in 2015,” he said.

Standard & Poor’s earlier this month lowered Oman’s sovereign debt rating to “A-/A-2”, citing the impact of lower oil prices.

Oman’s oil resources are not as vast as some of its bigger Gulf neighbours and it lacks their hefty fiscal reserves. State spending in 2015 is projected to leave a deficit of around 8 percent of gross domestic product.