Banks in the GCC region are showing a strong desire to expand their presence in major regional markets, particularly Turkey, Egypt, and India, according to Fitch Ratings on Tuesday. This is driven by improved economic conditions and growth opportunities in these target markets.
Several Gulf banks are reportedly exploring acquisitions in Turkey, Egypt, and India to diversify their business models and enhance profitability as part of a broader strategy for external growth.
“By investing capital in high-growth markets, GCC banks may offset weaker growth in their home markets,” Fitch stated in a report.
The report highlighted that the target markets offer greater potential for bank sector growth, given their strong real GDP growth prospects and relatively smaller banking systems compared to their economies.
GCC banks’ primary exposure outside the region is through subsidiaries in Turkey and Egypt, which held around $150B in assets in the first quarter of 2024. There is also growing interest in India, particularly from UAE banks, due to strong and expanding financial and trade links with the South Asian country.
GCC banks’ expansion plans
Earlier in July, First Abu Dhabi Bank (FAB) announced it is not considering purchasing a 51 percent stake in Yes Bank, despite numerous media reports suggesting the Abu Dhabi lender was one of the potential buyers for a $5B majority stake in the Indian bank.
The UAE’s largest bank by assets was also linked to a potential acquisition of Turkish conglomerate Koc Group’s 61.2 percent stake in Istanbul-based lender Yapi Ve Kredi Bankasi (Yapi Kredi). However, a deal between FAB and Yapi Kredi was hindered by disagreements over the price.
FAB has made several attempts to acquire banks outside the region in search of growth, including Egypt’s largest investment bank, EFG Holding.
Dubai Islamic Bank, the UAE’s largest Shariah-compliant lender by assets, acquired a 20 percent stake in Turkey’s TOM Group of Companies in September 2023.
Likewise, Dubai’s largest bank, Emirates NBD, acquired 99.85 percent of Denizbank’s shares for $2.76B in 2019.
Despite the high barriers to entry in the Egyptian banking market, GCC banks might have opportunities to acquire stakes in three banks through the North African country’s privatisation programme.
In a February report, McKinsey stated that mergers and acquisitions (M&A) remain a high priority for financial services players heading into the mid-2020s. Most financial services executives across Europe, the Middle East, and Africa (EMEA) expect M&A to remain a high priority for banks to maintain or gain momentum.
