Rise in Mergers and Acquisition activity in GCC banking sector

Doha: Against the backdrop of the COVID-19 pandemic and volatile oil prices, banks in the GCC will continue to consolidate to strengthen their balance sheet, global consultancy firm KPMG has said. 

The year 2020 has been a challenging year for banks globally. For economies in the region, the pandemic along with a volatile oil price resulted in contractions in credit and equity markets. Despite the banking sector soundness that provided an important cushioning in the GCC to the oil price decline since 2014, liquidity conditions have started to tighten due to the recent dual shock.  The current unprecedented times of the pandemic have resulted in subdued business activity, especially for small and medium sized enterprise’s (SME), which account for nearly 85 - 90 percent of registered companies in the region. This has resulted in banks experiencing surge in non-performing loans or credit losses, further impacting net income margins. In GCC, the overall net profit declined by 34.7 percent to $12.3bn in H1 2020, compared with $18.8bn in H1 2019.