Qatar's Al Khaliji, IBQ ends merger talks

Both the banks have been in talks for a potential combination for over a year.The tiny Gulf Arab state is heavily banked with a host of regional and international players and analysts have long called for a consolidation in the sector.

"The parties have together decided to end negotiations for the proposed combination of businesses after final terms could not be agreed," a statement issued late on Saturday by Al Khaliji said.

Al Khaliji, Qatar's sixth-largest bank by market value, is active in retail and corporate banking, as well as Islamic finance.

It said the decision to end merger talks will not affect its performance going forward.

The bank also said its existing governing, operational and financial structures will remain unchanged. Al Khaliji declined to comment further.

"It's a bit of a surprise. I thought it was a done deal, as they've been working on it for quite a while," said one Doha-based analyst who declined to be named.

IBQ is unlisted and has around 14 branches in Qatar, according to its website.National Bank of Kuwait (NBK), Kuwait's largest bank by market value, owns a 30 percent stake in IBQ.

Al Khaliji shares dropped 67 percent to their lowest levels since Dec. 21 on the Qatar bourse. Shares in NBK dropped 1.7 percent in Kuwait.

Copyright Reuters, 2011