Capivest, Capital Management House and Elaf Bank merger a sign of more to come? (By IFN)

GLOBAL: The shareholders of Capivest, Capital Management House (CMH) and Elaf Bank, three of Bahrain’s Shariah compliant investment banks, have given their approval to merge the banks; amid a competitive market for the kingdom’s Islamic banks and a strong market for mergers and acquisitions in the Middle East.

“The aim of this merger is to establish a strong banking institution that is able to compete solidly in a changing market. The merger will bring instant diversification of assets and revenues. Also, the bank will be able to capture larger projects and will enable it to diversify its capital sources,” said Isa Habib, the vice-chairman of Elaf Bank.

First reported by Islamic Finance news in November last year, the merger was mooted by the Central Bank of Bahrain (CBB) in an effort to strengthen the banks’ capital and balance sheets.

The deal, touted as the first three-way merger in Bahrain’s history and still subject to approval from the CBB and its ministry of industry and commerce, will see a new entity with shareholders’ equity of almost US$350 million and assets worth over US$400 million.

While it is a step forward in encouraging consolidation in Bahrain’s Islamic banking industry, there will still remain another 24 Shariah compliant banks in the kingdom following the Capivest-CMH-Elaf merger. Of those, seven are retail banks and the remainder, wholesale.

Nonetheless, the deal could represent a signal of more to come, as the value of M&A deals targeting companies based in the Middle East more than doubled in the first half of this year, according to research firm Zephyr. Despite political upheaval in the region, 117 M&A transactions materialized during the period, valued at US$8.92 billion; compared with US$4.08 billion recorded in the second half of last year.

Additionally, the firm noted that: “Deals involving targets in the banking sector brought in US$858 million the first half of 2012, the poorest performance since 2006, but enough to put the industry ahead of virtually all others in terms of deal value.”
See: http://redmoney.newsweaver.co.uk/1qtldsi5atah38rwoni3wx?email=true&a=6&p=25484995&t=21561155