Islamic banking consolidation accelerates across Gulf and South Asia

In Kuwait, Gulf Bank has initiated a feasibility study to assess the potential merger with Warba Bank, a prominent Islamic lender. This follows a proposal by Warba Bank, now a major shareholder in Gulf Bank, to combine the two entities into a single Shariah compliant institution. Warba’s 32.75% stake in Gulf Bank stems from its acquisition of Alghanim Trading Company. With both institutions offering complementary retail and investment banking services, the proposed merger is viewed as a strategic move to increase market share and expand Islamic banking operations. Gulf Bank, which manages over 50 branches in the country, is expected to notify regulators and seek approvals before engaging consultants to proceed with the merger evaluation.

Meanwhile, Bahrain’s Islamic finance sector continues to expand despite structural concentration risks. Total assets in the industry have exceeded US$80 billion as of early 2025, driven largely by Islamic banking, which represents nearly 80% of that figure. Sukuk issuance has grown robustly, supported by sovereign funding needs and regional investor appetite, particularly from Gulf-based Islamic banks. Fitch Ratings forecasts the sector to surpass US$100 billion in the next few years, buoyed by favorable regulations, digital finance adoption and merger activity. Recent legal reforms, including a draft netting law and new liquidity tools, aim to reinforce Bahrain’s position as a regional hub for Islamic finance innovation.

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