Salameh: High cost pushes bank mergers

Banks are looking for merger deals,
especially smaller ones

“The banking sector has to meet many requirements now, including new technologies and committees, which increases business costs and pushes mainly small banks to expand through mergers and acquisition deals with large banks,” said Governor of the Central Bank (BDL) Riad Salameh, in an exclusive interview with www.businessnews.com.lb today, during the Lebanese Economic Forum, organized by the Union of Arab Banks, at the Phoenicia InterContinental Hotel.

"Many banks are looking for merger deals on the horizon,” said Salameh. “BDL has not yet received any new request for merger from any bank,” he said.

Banks, especially small ones, have been active since last year in mergers and acquisition. Fransabank had acquired and merged with Ahli International Bank. Similarly, Banque de l’Industrie et du Travail (BIT) and the Near East Commercial Bank (NECB), a member of the Saradar Group, signed a Memorandum of Understanding (MoU), in order to merge the two entities. Banque Pharaon and Chiha is still in negotiations to sell part of its shares.

“The banking sector has always been active and flexible, but it’s up to each bank to make its strategic calculations on whether to conduct M&A deals, if its sustainability would imply heavy burdens in light of complicated international standards, ” said Joseph Torbey, Chairman of the World Union of Arab Bankers (WUAB).

The interest in M&A deals in small banks is not only gaining the attention of bankers, but is also attracting new players, mainly investors and business entrepreneurs such as in the case of the Rahmeh family, and Banque Pharaon and Chiha.

“The banking sector is at the forefront of the economy and this justifies the intention of big investors to invest in banks more than any other sector in the economy or even in the stock market,” said Torbey. “However, the management of banks also needs leaders, since the banking business is specialized and it’s not easy for investors to enter this business if there is no strong leadership to manage these banks,” he said.

The banking sector is still resilient, according to Salameh. “Its activity is correlated with the economic activity. Banks are registering less growth in their activities, but they are sound and have good profits,” he said.