Bahrain’s NBB hires Goldman Sachs to explore merger worth $2.43bn

Bahrain’s national bank appointed Goldman Sachs as a financial adviser for its negotiation with top banking institutions regarding a potential merger deal between the two, a disclosure showed.

According to a statement by the body on the country’s stock exchange, National Bank of Bahrain – which currently holds a market capitalization of $3.25 billion – is in the process of appointing an advisor to conduct due studies and diligence related to its merger with rival Bank of Bahrain and Kuwait, known as BBK, which has a valuation of $2.43 billion.

The potential deal coincides with the recent surge of mergers and acquisitions in the region, where businesses and financial institutions within the Gulf Cooperation Council have increasingly favored pooling their resources to achieve operational efficiency and maximize profits.

In Saudi Arabia, for example, the total volume of mergers and acquisitions deals during the first quarter of 2024 reached $955 million, with the chemicals sector accounting for 52.4 percent of the total.

NBB also appointed Freshfields Bruckhaus Deringer, a leading international law firm, as a legal advisor for the deal, according to the disclosure while BBK announced the selection of Citigroup Global Markets as its financial advisor.

This continues a trend in the region’s banking sector. Last year, Oman’s second-largest financial institute, Bank Dhofar, pursued a merger with its smaller rival, Ahli United Bank, creating a lender with just under $20 billion in assets.

These deals come as a testament to global rating agency Moody’s expectation in March of last year that banks in the GCC region will witness a rise in M&A activity, enabling future synergies and oil revenue divergences in the area.

“Consolidation among GCC region banks brings scale to support the diversification of Gulf economies away from oil and benefits in revenue and cost synergies,” said Francesca Paolino, an analyst at Moody’s.

The rating agency noted that this development would occur despite the region’s pre-existing strong bank financial fundamentals and modest over-banking level.

It also said that the majority of Middle East M&A activities were concentrated in Saudi Arabia, the UAE, and Egypt, which collectively recorded 563 deals or 89 percent of the region’s total volume.