The United Gulf Holding (UGH), a Bahrain-listed financial services firm, received approval from the Central Bank of Iraq to buy a stake in Bank of Baghdad. The company will acquire 51.8 per cent stake in Bank of Baghdad, one of the largest commercial banks in Iraq, from Kuwait-based Burgan Bank, UGH said in statement on the Bahrain bourse on Wednesday. The transaction is expected to be “profit accretive going forward” for the company and will increase the size of its balance sheet by $1 billion (Dh3.67bn), UGH said. In the medium term, however, the debt level of the company will rise by $55 million, which it has acquired to fund the deal. The transaction is expected to be completed by the end of March this year. Burgan Bank earlier this month said it inked a deal to sell its majority stake in Bank of Baghdad to UGH – one of its sister companies – as it looks to reduce group-wide non-performing loans, exit riskier assets and consolidate its position in the domestic market. The transaction is likely to have a one-off negative impact of around 9 million Kuwaiti dinars (Dh108.8m) on Burgan Bank's 2019 net income, the lender said. Part of this impact of around 4m dinars is expected to be reversed after completion of the transaction, it added at the time. Banks in the GCC are looking to exit riskier assets to maintain profitability amid tightening margins and softer lending growth. Bank mergers in the region have also picked up pace in recent years as lenders try to gain scale and drive efficiencies to face tough market conditions against a weaker global economic backdrop. First Abu Dhabi Bank, the UAE’s largest lender by assets, is currently in discussions with Lebanon’s Bank Audi to acquire its fully-owned subsidiary in Egypt. FAB, formed in 2017 following a merger of the National Bank of Abu Dhabi and the First Gulf Bank, said talks are in line with its strategy to pursue growth opportunities in the UAE and its targeted markets. Earlier this month, Dubai Islamic Bank completed its acquisition of competitor Noor Bank in a deal that will create one of the largest Islamic banks in the world, with total assets of more than Dh275bn.