April 26, 2017 / 5:25 AM / in a year

MIDEAST STOCKS-Saudi may be buoyed by Alawwal Bank-SAAB merger talks

DUBAI, April 26 (Reuters) - Banking shares in Saudi Arabia may buoy the bourse on Wednesday after two large banks said they were in initial stages of tie-up talks while strong emerging equity markets may help shares in the United Arab Emirates and Qatar.

Saudi lenders Alawwal Bank and Saudi British Bank have agreed to start talks about a merger that could create the kingdom’s third biggest bank with assets of nearly $80 billion.

Earlier this month, Alawwal posted a 36.7 percent drop in quarterly profit as the lender was hit by higher impairment charge for credit losses, while SABB reported a 9.3 percent drop in net profit for the period.

The banks said on Tuesday that any merger agreement would be subject to a number of conditions.

Nevertheless, this would be the first time banks in the oil-exporting country have considered a merger since oil prices fell to very low levels, and it may ignite interest in banking stocks in general.

“If this were to happen it would be a big move, but also it’s a strategic one, and banking shares will certainly move today,” said a Jeddah-based asset manager.

Emerging-market stocks rose almost 1 percent, extending gains from the previous session to touch their highest since June 2015, good news for regional markets that are members of international emerging market indexes.

So far this year Dubai, Abu Dhabi and Qatar have lagged behind other emerging markets as crude prices have recently been trading close to their one-year average price of around $51.00 a barrel and as first-quarter earnings from local companies have given little reason for a sustained rise in those stock markets.

Dubai’s index, however, may come under pressure as the shares of the largest listed developer Emaar Properties go ex-dividend. (Reporting by Celine Aswad; Editing by Subhranshu Sahu)

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