Al Khalij, Masraf Al Rayan merger deal to create Qatar's second-largest lender

Dubai

AL KHALIJ Commercial Bank shares surged on Sunday after it agreed with Masraf Al Rayan for a share-swap combination that will create Qatar's second-largest lender.

The shares climbed as much as 8.7 per cent in Doha, the biggest intraday gain in more than two months. Masraf Al Rayan shares rose 0.8 per cent.

Masraf Al Rayan plans to issue 0.5 securities for every Al Khalij share for the merger. The deal is valued at 8.2 billion riyals (S$3 billion), according to Bloomberg calculations.

Combining with Al Khalij will see Al Rayan leapfrog its next two largest competitors by giving it US$47 billion in assets - still six times less than that of Qatar National Bank. Qatar has 2.5 million people being served by about 20 local and international banks, leaving smaller lenders at a disadvantage unless they can find a niche or competitive edge.

The combination will "create a larger and stronger financial institution with a strong financial position and significant liquidity available to support Qatar's economic growth", the lenders said on Thursday.

Al Rayan's Ali Bin Ahmad Al Kuwari will become chairman and Al Khalij's Hamad Bin Faisal Bin Thani Al-Thani will become vice-chairman of merged entity. The executive committee of the board will be chaired by Hamad Bin Faisal Bin Thani Al-Thani.

Al Rayan and Al Khalij started talks in June last year amid a wave of bank consolidations in the Gulf's financial industry. Lenders are seeking to build scale to cope with the fallout of lower oil prices and the economic havoc caused by the coronavirus pandemic.

The spate of large transactions has helped consolidate a fragmented industry. Saudi Arabia's largest lender, National Commercial Bank, last year bought Samba Financial Group for US$15 billion in one of the biggest banking takeovers of 2020.

JPMorgan Chase is financial adviser to Al Rayan and Al Khalij. BLOOMBERG