The shareholders of Faysal Islamic Bank of Bahrain (FIBB) and Islamic Investment Company of the Gulf (IICG) approved on 27 March board proposals that the two institutions should merge.

The new entity is to be named Shamil Bank of Bahrain, and will have paid- in capital of $230 million. Authorised capital will be$500 million. The merger still needs approval from the Bahrain Monetary Agency, and the full financial and operational aspects are expected to be completed by the end of the summer.

The merger has been pushed ahead by the Dar al-Maal al-Islami (DMI) Trust, which holds controlling stakes in both banks, and is keen to consolidate its Bahrain-based banking assets (MEED 17:3:00). The new entity will be one of the largest Islamic financial institutions in the world. 'The focus of operations of the new entity is yet to emerge,' says one senior Bahrain- based Islamic banker. 'But wherever it lies the new bank will be a powerful force.' Both banks have offshore licences, but FIBB also has an onshore licence, and a branch network covering Bahrain, Pakistan, Yemen and Bangladesh.

DMI's plans follow the move made by the Dallah Albaraka group to consolidate its diverse Islamic banking operations under a Bahrain-based holding company (MEED 8:10:99).

Both FIIB and IICG have reported earnings growth for full-year 1999. IICG produced the more spectacular performance, with net profits rising seven-fold to $6 million, from $673,000 in 1998. The bulk of the increase was generated by increased revenues from investments and fee-generating services. Significantly, the entire profit has been ploughed into reserves to bolster the bank's capital base in preparation for the merger.

FIIB reported net earnings of $4.1 million, a marginal improvement on the $4 million recorded in the previous year. The bank says total income fell 17 per cent primarily as a result of the difficult operating environment in Pakistan, where the bank has a strong presence. The bottom line was supported by a sharp drop in provisioning to $8.5 million in 1999, from $22.3 million in 1998. As is the case with IICG, FIBB's full profits have been transferred to reserves to boost capital.