* 10 out of 11 banks slide in Saudi * Saudi International drops after merger update * Qatar Electricity, Doha Bank push Qatar to 5-month low * Egypt's SODIC gains on dividend declaration By Abinaya Vijayaraghavan and Ateeq Shariff March 7 (Reuters) - Most major Gulf markets slipped sharply on Thursday, with a possible increase to Islamic tax pulling down Saudi Arabia's banks and Qatar hitting a five-month low.
Saudi Arabia's index was down 0.6 percent due to a sell-off in its bank stocks, with Al Rajhi Bank shedding 2 percent and the country's largest bank, National Commercial Bank, declining 2.1 percent.
The kingdom is considering plans to increase an Islamic tax paid by local banks to as much as 20 percent, or double the current rate, Bloomberg reported.
Banks have been at loggerheads with the authorities since last year over additional payments of Zakat - the name of the religious tax - for years going back as far as 2002.
Saudi International Petrochemical slipped 1.5 percent. The firm said potential synergies from a possible merger with Sahara Petrochemical is expected to bring an extra 175-225 million riyals recurrent EBITDA earnings per year. Sahara added 0.4 percent.
The Dubai index fell 1.2 percent, with Emaar Properties dropping 3.1 percent and Emirates NBD sliding 1.6 percent.
Dubai's property prices were partly behind the index's worst performance compared with other major markets last year.
While strong fourth-quarter results from its real estate firms lifted stocks this year, the sector continues to suffer from excess supply.
"The fundamentals, the macroeconomic effect is still clouding the scene. The uncertainty, the ambiguity, the negative press investors are seeing are pushing the index down and the earlier rotation away from Saudi into UAE is kind of dissipating now," said Talal Samhouri, head of asset management at Amwal LLC said.
The Qatar index was down 1 percent to its lowest in five months as Qatar Electricity and Water dropped 5.4 percent and Doha Bank lost 4.6 percent. Their shareholders approved amending the nominal value of a share to one riyal ($0.2667) from 10 riyals, a regulatory decision to attract investment.
The Abu Dhabi index fell 1.3 percent, with the United Arab Emirates' largest lender First Abu Dhabi Bank losing 2.3 percent and Agthia Group decreasing 3.4 percent.
Growth in the UAE's non-oil sector slowed to a 28-month low in February amid weaker increase in new business, according to a survey. The employment index also fell to 47.5 percent.
The reason for Gulf markets' weakness is "probably a combination of the employment tracker at its weakest, and in general investors are getting a bit cautious and taking some money off the table," said Vrajesh Bhandari, senior portfolio manager at Al Mal Capital.
Egypt's blue-chip index was the exception, rising 1.8 percent, as its largest lender Commercial International Bank Egypt gained 2.5 percent and El Sewedy Electric jumped 5.6 percent.
Sixth Of October Development And Investment hiked 3.1 percent after posting a rise in full-year operating revenue and declared its first dividend payout since 2011.
SAUDI ARABIA The index slipped 0.6 pct to 8,479 points DUBAI The index was down 1.2 pct at 2,595 points QATAR The index fell 1 pct to 9,781 points ABU DHABI The index lost 1.3 pct to 4,914 points EGYPT The index was up 1.8 pct at 14,904 points KUWAIT The index was flat at 5,597 points OMAN The index lost 1 pct to 4,113 points BAHRAIN The index dropped 0.1 pct to 1,409 points (Reporting by Ateeq Shariff and Abinaya Vijayaraghavan in Bengaluru; Additional reporting by Nafisa Eltahir in Dubai; Editing by Andrew Cawthorne)