Alizz Islamic Bank shows keen interest in merger with United Finance

Muscat: Alizz Islamic Bank has expressed an interest in a merger with the United Finance Company, which is subject to due diligence of the latter institution.

United Finance Company has forwarded the proposal from Alizz Islamic Bank to its board, the company said in a disclosure statement posted on the Muscat Securities Market (MSM) website.

The merger proposal by Alizz Islamic Bank was mooted after two years of dropping similar proposals by three financial institutions—Al Omaniya Financial Services, National Bank of Oman and Bank Nizwa. All these institutions were looking at consolidating their leadership position in 2015 by acquiring United Finance, which could be a way to achieve inorganic growth.

“No legally binding commitment has been made and the transaction remains subject to approval by the regulators and other stakeholders,” Alizz Islamic Bank said in a separate disclosure statement.

There has been a strong case for merger within the leasing sector in the last two years. “The emergence of Islamic banks has created a situation where the leasing companies have to compete with Islamic banks and window operations of conventional banks. Leasing companies are under pressure and Islamic banks also need assets for growth. So, there is a strong case for a merger,” said a senior market analyst, who did not want to be named.

Consolidation is the best way when there is a slowdown in growth. Also, the majority of assets of leasing firms might be converted into Islamic products since these are all asset-backed.

United Finance’s net profit declined by 34 per cent to OMR757,000 for the first quarter of 2017, against OMR1.15 million for the same period of last year. Total assets of United Finance also dropped by 6 per cent to OMR117.82 million, from OMR125.07 million during the period under review.

Total equity of the company was pegged at OMR43.61 million by the end of March this year, up by 4 per cent, compared with OMR42.11 million for the same period of last year.

Meanwhile, Alizz Islamic Bank shares surged by 2.3 per cent to 89 baisas amidst 1.31 million shares changing hands on MSM.