(MENAFN - Muscat Daily) Muscat- Oman Arab Bank (OAB) last week wrote to Alizz Islamic Bank to explore the possibility for a strategic collaboration that may lead to an eventual merger of the two banks.
'The potential strategic collaboration will be subject to both institutions agreeing on the terms of the transaction and subsequent approvals from the respective board of directors, shareholders and the regulators', Oman International Development and Investment Co (Ominvest) said in a disclosure filed to the Muscat Securities Market (MSM) on Thursday. OAB, a conventional bank with Islamic window operations, is the subsidiary of Ominvest.
Alizz Islamic Bank, in a separate disclosure to the MSM, confirmed that its chairman received a letter from OAB requesting that the two banks explore the possibility of a strategic collaboration that may lead to an eventual merger of the two entities. 'The board of directors in its meeting held on Wednesday acknowledged the letter and agreed to proceed and explore this opportunity with Oman Arab Bank', Alizz Islamic Bank said.
Following the announcement, the shares of Alizz Islamic Bank rose 3.9 per cent on Thursday at the MSM.
Oman's banking sector will witness a possibility of consolidation after a brief period.
The merger between HSBC's Oman operations and Oman International Bank was successfully completed in 2012, while the proposed merger between BankDhofar and Bank Sohar failed to materialise in 2016 after many years of discussions.
'An interesting and a positive development in Oman's banking sector with the possibility of a merger between OAB and Alizz Islamic Bank being discussed', Gulf Baader Capital Markets (GBCM) said in a note.
'Overall, we view this development as a positive move with the sector needs consolidation. We believe the regulator would be encouraging the merger schemes in the banking space. We are expecting more strategic collaboration/mergers in Oman's banking sector during this fiscal year', the note added.
'Though we have preliminary information on this strategic alliance, we do see the progress would happen over the coming quarters which would determine the success of the completion', GBCM said. 'The merger would have its own advantages to scale up the business and ensure operation efficiencies, while the integration needs to be smooth for the eventual success'.