Bahrain-based Arab Banking Corporation (ABC) has acquired a 49 per cent stake in Libya’s Mediterranean Bank for $60m in a bid to increase its business in the country and strengthen its presence in North Africa.

ABC is already active in the Libyan market, having established the first ever representative office of a foreign bank in Tripoli in 1988.

Mediterranean Bank, which offers retail and corporate banking services, is headquartered in Benghazi, in the North East of Libya, but also has branches in Tripoli and Misurata. It was established in 1997.

The acquisition, subject to final regulatory approval from the Libyan central bank, is likely to close before the end of the first quarter of 2011, said a statement from ABC published on 14 December.

Upon completion, ABC can appoint three directors, out of a total of seven, to the board of Mediterranean Bank.

“The acquisition will provide ABC with access to the increasingly important Libyan banking market,” said Hassan Juma, president and chief executive officer of ABC in the statement.

“I am confident that Mediterranean Bank will, with the support of the ABC Group, establish itself as one of the leading banks in Libya, as the competitive landscape in Libya evolves as a result of the recent opening of the banking market to foreign capital.”

On 9 August 2010, Italian bank UniCredit was awarded a licence by the Libyan central bank to own a 49 per cent stake in a new greenfield bank. Current Libyan regulations prohibit foreign banks from opening a branch.    

Five other international banks lost out, including three Gulf institutions – the UAE’s Emirates NBD and Mashreq, as well as Qatar Islamic Bank (QIB) – which had all been shortlisted for a licence.

Emirates NBD has resumed talks with the Libyan central bank and is considering other possible options.

Gulf banks’ single-digit loan growth is forcing them to look outside their home market to generate new revenue streams and they are showing a growing interest in Libya. Th North African state has been increasingly vocal about plans to liberalise its economy since shedding its pariah status in 2004 after the lifting of US and European-imposed sanctions. 

Aside from boasting Africa’s largest oil reserves, Tripoli is ploughing $60bn into infrastructure projects, such as the construction of the $5bn Energy City Libya project, as well as the high-speed railway linking the country’s main cities along the Mediterranean coast.

The government announced a reform programme for the banking sector in 2007, with the stated aim of making Tripoli a regional finance hub by 2012.