Gulf Bank deal nears as suitors ponder moves

• Text size
•  
•  

KUWAIT: Banking officials told Kuwait Times that a number of offers are currently being processed over the purchase of Gulf BankGulf Bank in full or a purchase of major shares of its owners. They said the move was prompted after losses were sustained by the bank due to dealing in derivatives.

Sources close to major shareholders said there are now similar views between two major shareholders in the bank after settling previous differences related to the bank's management, which means the two combined can have shares that near 50 percent. They said one major offer is from a local bank which expressed its desire to purchase Gulf BankGulf Bank in full, as it aims to increase its share of the local market to 36 percent to compete with another bank which has a 35 percent share.

Sources said some owners of Gulf BankGulf Bank have valued it at KD 1 billion, adding that the prices of shares during any negotiations will not be under 900 fils. The bank enjoys large assets, shareholders' rights, and excellent banking performance. The officials also said that the Central BankCentral Bank has not asked the board of directors at Gulf BankGulf Bank to resign, despite information that the Central BankCentral Bank intends to take over after pumping huge amounts of funds to cover losses that resulted from Gulf BankGulf Bank's dealing in derivatives.

The National Bank of KuwaitNational Bank of Kuwait, the country's biggest lender by assets, said yesterday it will consider acquisitions to benefit from lower asset prices amid the global financial crisis, KUNA reported. "The bank will aim during the coming period to study more acquisition opportunities in the region and abroad," Chairman Mohammad Al-Bahar said. "There are opportunities in the current circumstances that global markets are going through and they are good opportunities for NBKNBK acquisition plans.

No one from NBKNBK mentioned Gulf BankGulf Bank but last week when asked by the Kuwait Times, Gulf BankGulf Bank Chairman Qutaiba Al-Ghanim said his bank is open to discussions about a merger with NBKNBK.

Local daily Al-Jarida reported that NBKNBK will officially submit an offer to buy a controlling share in Gulf BankGulf Bank to change it into an Islamic bank in few days. Informed sources said the offer will be presented to Gulf BankGulf Bank owners to take at least 51 percent of its shares after signing an agreement to review the bank's records in order to evaluate its assets and reach a final price.

The sources said that opening the books for the purpose of buying shares of any financial institution means those wishing to buy want to study the assets and shareholders' rights in the establishment through a third party, so that the price is set in a fair way and then presented via the Kuwait Stock Exchange to the owners. They said NBKNBK's offer to buy a majority share in Gulf BankGulf Bank comes out of the importance of getting into Islamic banking. The sources said NBKNBK will inform the bourse administration about any developments in the deal, especially when the books' review is completed.

Gulf BankGulf Bank's capital is KD 125 million and the shares of major owners are as follows: Al-Ghanim Industries 18.5 percent, Al-Ghanim Commercial Co 13.23 percent, Expansion Trading Co 11.74 percent, Behbehani Investment and others 5.805 percent and Al-Zumorrada Holding and others 10.6253 percent. Latest financial figures issued by the bank for 9 months show share profitability at 70 fils, while net profits were KD 86 million. Returns to shareholders right were 26.5 percent, returns on assets 2.24 percent, total assets KD 5.1 billion and debts KD 4.7 billion.

Meanwhile, KUNA reported that the government will back local investment firms in the face of the global financial crisis. The Central BankCentral Bank governor yesterday as saying the national economic crisis task force he heads will "provide financial support" for these companies. Sheikh Salem Abdul-Aziz Al Sabah did not provide any figures or elaborate on the plans. He says the newly formed task force will finalize "specific suggestions" soon.

A Kuwaiti analyst said yesterday Kuwaiti investment firms will see a wave of restructuring and mergers after having been hit by the crisis. Amani Bouresli, a professor for finance at Kuwait University, said that the country's 95 investment firms, which make up roughly half of all listed companies, were heading towards mergers or sales as the credit crunch hit the world's seventh-largest oil exporter.

I'm expecting in the next few months we will see restructuring in the investment sector," said Bouresli, a co-author of a bill to set up a financial regulator and achieve more transparency in the Arab world's second-largest bourse. Under a government plan to set up a financial regulator the status of many firms would have to be reviewed as some of them were acting as mutual funds or should be restricted to certain activities such as brokerage businesses, she said.

The crisis made this problem more apparent to the regulators, and I'm sure that we will hear in the next few weeks or months about mergers, sell offs, restructuring in this sector," Bouresli said during an economic conference held at the Reuters office in Kuwait. The Central BankCentral Bank governor earlier yesterday denied a report that local investment firms suffered losses worth more than KD 5 billion ($18.50 billion). Al-Seyassah newspaper said in an unsourced report that a Central BankCentral Bank-led task group was asked for at least KD 7 billion to aid banks and firms hit by the global financial meltdown, adding investment firms losses totaled more than KD 5 billion.

Meanwhile, the Kuwait Banking Union submitted a new memo to the Central BankCentral Bank governor mentioning the union's vision on eradicating the liquidity shortage crises at investment companies. The memo however, was not different from the one it submitted earlier, because the new memo depends on amending the old one so that the bank that leads the company's debt can negotiate with foreign banks on behalf of the company. Sources said this solution is tied with pumping money from the Public Investment Authority and other government bodies into Kuwaiti banks to have enough funds to pay back the debts of investment companies.

By A Saleh

© Kuwait Times 2008