21 July 2005

DUBAI -- National Bank of Oman (NBO) and Commercial Bank of Qatar (Commercialbank) formally concluded a strategic alliance agreement in Muscat earlier this month.

The agreement, generated by the strong brotherly ties between the two countries, exemplified by the regular exchanges between the two Heads of State, His Majesty, Sultan Qaboos Bin Said, and His Highness the Amir Shaikh Hamad bin Khalifa Al Thani, puts in place one of the few AGCC cross border agreements between two national banks and sets the stage for strong growth by both banks in the region.

Described by investment analysts from around the region as a natural strategic fit, Commercialbank has confirmed the completion of agreements for its acquisition of a 34.9 per cent interest in NBO, including increasing shareholders equity in the bank by RO44.5 million (equivalent to QR420.97 million) from RO105.5 million to RO150 million. NBO has issued 10 million new shares to Commercialbank, who will also purchase 17.92 million shares from existing NBO shareholders in the secondary market. It has agreed to a management services agreement with Commercial Bank  which has been approved by both Boards and also by the Central Bank of Oman and Qatar Central Bank.

This is the first AGCC cross-border strategic alliance between banks from Qatar and Oman. Both Commercialbank and NBO recognize dynamic changes to the face of banking in the AGCC and equally the importance of achieving critical mass, risk diversification and economies of scale as well as the opportunities to enhance their participation in the very attractive banking markets of both countries.

Standard & Poor's in their recent report, 'Gulf Banking Will Have To Consolidate To Meet Tomorrow's Global Competition', point to the need for "Gulf banks to acquire other banks or seek alliances or mergers" to counter increasing competition "that could first erode their franchise and ultimately their financial performance. Gulf banking systems therefore will need to consolidate, as size will increasingly matter."

The combined entity will create a regional banking powerhouse, able to make the most of stimulating strategic growth opportunities.

Commercialbank's Chairman Abdullah bin Khalifa Al Attiyah said, "In the current climate of globalisation and consolidation within the banking sector it is necessary for regional banks to join forces to leverage local knowledge and competencies."

Chairman of the Board of National Bank of Oman, Shaikh Suhail Salim Bahwan, added "The alliance provides a means for both banks to support the strengthening of national economic development and bilateral economic exchange, which symbolise the trust-based relationship between the two countries."

BY A STAFF REPORTER

© Khaleej Times 2005