Some Gulf banks may need to consolidate

Significance

His statement contrasts with broader regional trends. The six states of the Gulf Cooperation Council (GCC) have been overbanked for many years, but buoyant economies provided a rising tide of growth opportunities. However, a prolonged period of low oil prices and weaker government finances is tightening liquidity and increasing bad debts. This is driving a degree of consolidation in the sector.

Impacts

• Consolidation rumours will drive rallies in banking shares.
• Larger banks will facilitate financing of major infrastructure projects.
• Governments will boost domestic liquidity by borrowing abroad.