Fitch Ratings has noted that the recent surge in mergers and acquisitions (M&A) activity among Kuwaiti banks is a positive development for the sector. In a market characterized by excess banking institutions, these consolidation efforts are seen as strategic moves to drive growth, diversify business models, and strengthen financial profiles.

Despite Kuwait’s strong fiscal and external balance sheets, the banking sector’s growth potential is limited by frequent political gridlock and institutional challenges. The delay in implementing key reforms, including the new Public Debt Law and mortgage law, further impedes progress and hinders the sector’s development.

Last month, Boubyan Bank and Gulf Bank announced their plans to merge, forming a significant Islamic bank with assets estimated at approximately KWD 16 billion ($53 billion) and a 15% market share. The merger is anticipated to be completed by 2025.

In recent years, Kuwaiti banks have increasingly engaged in mergers and acquisitions, both domestically and internationally. In June, Burgan Bank acquired a 100% stake in Bahrain’s United Gulf Bank and sold off certain non-core assets. This follows earlier divestments, including a 52.2% stake in Burgan Bank Turkiye to Al Rawabi United Holding and a 51.8% stake in Bank of Baghdad to Jordan Kuwait Bank earlier in 2023.

Kuwait Finance House (KFH) also expanded its operations in Bahrain, Egypt, and the UK in 2022, though it has since divested from some subsidiaries. The Kuwaiti banking sector, comprising ten Fitch-rated banks, is projected to experience modest credit growth of 3%–4% in 2024, up from 2.3% in 2023. This growth is expected to be driven by high interest rates, modest GDP growth, and political divisions.

Despite these challenges, the sector remains well-capitalized and liquid, with strong risk-management practices. Overcoming political and institutional hurdles could further accelerate credit growth in the future.

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