Banking Industry in Bahrain: Changing Landscape

Following the mergers between Ithmaar Bank and First Leasing Bank and a 3-way merger between Elaf Bank, Capital Management House and CAPIVEST, Abdul Karim Ahmed Bucheery, Chief Executive of BBK Bahrain and Chairman of the Bahrain Association of Banks, outlines the future structure of the banking industry in Bahrain.

Bucheery believes that the wave of consolidation that is sweeping through Bahrain is likely to continue.

“I think consolidation will continue to be a very serious method that many players in the market will look at and when opportunities come and the need arises, there will be consolidations. The newest that we have heard in the market is that National Bank of Bahrain is now taking over a significant share in Bahrain Islamic Bank so basically there is some sort of consolidation between one of the oldest Islamic banks in Bahrain and a major commercial bank, again one of the oldest in Bahrain, which I think is a good move to bring stronger banks into the market,” explains Bucheery.

He also believes that profits will fall as regulatory and economic headwinds grow stronger, thus hurting the banks: “Banking is not going to be as easy as it used to be in the past. The high return that the banks used to generate in the past, higher than 20% return on equity, will no longer be the case going forward with the more difficult and stringent requirements on capital allocation, risk and what have you, including the sort of caps you receive from the regulators and the interest rate you can charge.”