Kuwait Finance House (KFH), has halted talks to acquire Investment Dar's 40 percent stake in Bahrain Islamic Bank, the lender said on Monday.
"We had an earlier study (about acquiring Dar's stake) from a long time, but it stopped ... and this option is not part of KFH-Bahrain's plans these days," Abdul-Hakeem al-Khayyat, the chief executive of KFH's Bahrain unit, said in a statement.
Investment Dar said in March that it may sell some assets to meet its obligations as it seeks to restructure its debt.
Earlier this month, Dar said it had defaulted on a $100 million Islamic debt issue, the first such default for a major, public Islamic instrument in the region.
Trading in Dar's shares has remained halted since April 1, after the firm failed to publish its 2008 earnings report on time.