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3-way Qatari bank merger on track despite diplomatic crisis

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3-way Qatari bank merger on track despite diplomatic crisis

A merger between three Qatari lenders remains in the pipeline despite liquidity concerns in the local banking sector amid an ongoing diplomatic rift between Qatar and some of its neighbors.

Masraf Al Rayan (QPSC), Barwa Bank QSC and International Bank of Qatar (QSC) entered into initial discussions in late 2016 regarding a three-way merger, and in April 2017 formed a committee to oversee the process. The transaction would create the largest Shariah-compliant bank in Qatar and the third-largest such lender in the Middle East, the companies said.

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A combination of the three would also create the second-largest bank in Qatar in terms of assets and loans, according to data gathered by S&P Global Market Intelligence. The combined bank would have had pro forma assets of 173.34 billion Qatari riyals at 2016-end, behind Qatar National Bank (QPSC) but ahead of Qatar Islamic Bank (QPSC) and Commercial Bank (PSQC).

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Fast-forward to early June, when Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic ties with Qatar and later imposed sanctions on the country for alleged support for terrorism. The central bank of the UAE said some "terrorists or terrorist organizations" held accounts at Qatari lenders, including Masraf Al Rayan and Barwa Bank.

The crisis has sparked liquidity concerns at Qatari banks, which rely heavily on foreign funding, and prompted the sovereign wealth fund to pump billions of U.S. dollars in cash deposits into the domestic banking system, as lenders in the four countries that cut ties with Qatar moved to withdraw funds.

The diplomatic crisis has not derailed the three-way merger, however. Executives at the banks were close to finalizing the valuation of the potential merger in late June, Reuters reported. It is now expected to be completed by 2017-end.

As of Aug. 4, US$1 was equivalent to 3.66 Qatari riyals.

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