Three banks based in Abu Dhabi, the UAE’s capital, are involved in early merger talks that could result in the formation of a lender with total assets estimated at $113bn.

Abu Dhabi Commercial Bank (ADCB), which is majority owned by the government, and Union National Bank confirmed on 4 September that they are holding “exploratory talks” regarding a potential merger with two local banks.

In a filing with the Abu Dhabi Securities Market, both banks said “discussions are at very preliminary stage and may not result in a transaction.”

ADCB also confirmed holding similar and separate discussions with the shareholders of Al-Hilal Bank, which is not listed with the local stock exchange.

Thomson Reuters estimates the three-way merger could result in combined assets worth $113bn, making it the UAE’s third largest lender next to First Abu Dhabi Bank (FAB) and Dubai-based Emirates NBD.

Commenting on the planned merger, Tariq Qaqish, managing director, asset management at UAE-based MenaCorp, said the UAE has been “overbanked for a long time and consolidation has been happening … to create bigger entities to compete strongly regionally and globally.”

Two of Abu Dhabi’s top banks – First Gulf Bank and National Bank of Abu Dhabi (NBAD) - merged last year to create FAB. The merged bank had total assets of approximately $175bn.