Kuwait – Mubasher: A merger between Kuwait Finance House (KFH) and Bahrain-based Ahli United Bank (AUB) is likely to result in “considerable integration challenges”, according to Moody’s.
Such challenges are likely to arise owing to the two banks’ “geographically dispersed operations”, the ratings agency highlighted, noting that merger would be credit positive for KFH.
Other risks would include the merged entity’s structure and strategy, which may change KFH’s overall risk profile in terms of solvency (capital and profitability) and liquidity (liquid assets and access to funding), Moody’s added.
KFH currently has an A1 stable rating.
Last week, the Kuwaiti bank announced news that it was considering a merger with its Bahrain-based counterpart. If successful, the merger would bring about the sixth-largest bank in the GCC region with assets totalling $85 billion as per data for year-end 2016.
The merger remains at an early stage and still requires shareholder approvals as well as regulatory approvals from both Kuwait and Bahrain, along with financial analysis.
The merged entity is likely to benefit from “potential economies of scale and increased lending opportunities in a slowing economic environment,” according to CPI Financial.
