The proposed merger between Oman International Bank (OIB) and the Omani operations of HSBC could create a bank capable of taking on the top three in the sultanate's competitive banking sector, according to executives and analysts.
Subject to the completion of the deal, experts believe OIB could utilise HSBC's international experience, management skills and technological capability and add it to its own local presence in order to create a 'competitive' bank.
OIB shares rose most in over two years on Sunday, gaining 7.14 per cent. OIB also helped boost activity on the Muscat Securities Market (MSM), accounting for 48 per cent of the total market volume with a turnover of over RO1.28mn.
In a statement to MSM refuting speculation that OIB was to buy out HSBC's Omani operations, OIB chairman Dr Juma Ali Juma al Juma said that a merger would combine the sixth- and fifth-largest banking entities in the sultanate to create a 'leading player.'
He said, “OIB is in early stage negotiations about a merger of its business with HSBC's Oman operations. We are not discussing buying HSBC's business in Oman. If the negotiations proceed to an agreement, it will lead to a merger.
“OIB is Oman's fifth largest bank by assets, and HSBC is number six. Combined, they would have the scale to be a leading player in the fast-growing Omani banking market.”
According to the company's 2010 year-end financials, OIB holds RO1.16bn in assets, with RO639mn in loans and advances, RO128mn in cash and balances with the central banks and RO139mn in treasury bills and certificates of deposit.
Kanaga Sundar, senior analyst at Gulf Baader Capital Markets, told Muscat Daily that the merger proposals are “more in line with the strategic review” announced by OIB in July this year.
He said, “Looking at the initial figures, I think the combined entity could be a strong entity. Looking at the combined numbers of the two banks, it will give tough competition to the top banks in Oman.
“The synergies of a local player combining with an international one will be pretty strong. We are definitely positive over the long term. It should give competition to the top three banks in Oman.” Joice Mathew, senior manager of the research department at United Securities, added that a merger would create the 'third-largest' bank in the sultanate.
He said, “If they merge, that will create the third-largest entity, which would be quite competitive. “There are a lot of synergies that OIB could benefit from if the deal goes through. HSBC's technological and management capabilities are superior and internationally proven, which could benefit OIB.”