Islamic Banks in the GCC to See Rise in M&A Activity in 2025
Islamic banks in the GCC are gearing up for more mergers and acquisitions (M&A) in 2025. This trend stems from increased competition and a push to boost market share and growth.
Smaller Islamic Banks Face Higher M&A Pressure
Newer and smaller Islamic bank face more M&A pressure due to weaker market positions. These banks struggle with limited pricing power, high funding costs, and lower capital buffers. They also operate in highly competitive environments with little room for profit expansion.
Bahrain Offers Strong M&A Opportunities
Bahrain holds strong M&A potential due to its fragmented banking market. Many banks compete there, causing low pricing power and intense market rivalry. The Bahraini government supports consolidation but common shareholders are often lacking.
Strategic Deals Aim to Create Regional Champions
Many M&A deals aim to create strong national or regional banks. In 2022, Kuwait Finance House acquired Ahli United Bank for $11.6 billion. This move transformed AUB and subsidiaries into fully Shariah-compliant institutions. KFH continues to explore regional expansion, including interest in Saudi Investment Bank.
UAE Sees Bigger Banks Acquiring Smaller Islamic Lenders
In the UAE, older, stronger Islamic bank are acquiring smaller, newer counterparts. Dubai Islamic Bank acquired Noor Bank in 2019, boosting its scale significantly. The deal formed one of the largest Islamic bank globally by asset size.
Conventional Banks Target Islamic Subsidiaries for Growth
Conventional banks also show strong interest in Islamic banking growth. Emirates NBD moved to acquire full ownership of Emirates Islamic Bank last month. Such deals help conventional banks gain deeper access to growing Islamic markets.
Islamic Bank Outperform Peers in Financing Growth
Banks outperform conventional banks in financing growth across Middle Eastern markets. They attract customers through broader adoption, innovative products, and stronger Shariah compliance.
Conclusion
M&A activity among Islamic bank will continue rising across the GCC in 2025. This will strengthen franchises, improve economies of scale, and unlock new growth opportunities.