Bahrain’s BMI Bank and Al-Salam Bank have agreed in principle to merge, the lenders confirmed on 23 May.

The merger is set to create Bahrain’s third-largest bank, with total assets of about BD1.7bn ($4.5bn) and shareholders’ equity of about BD293m. BMI Bank is owned 49 per cent by Bank Muscat.

“Consolidation was the only way forward for Bahraini banks to stay competitive and financially strong in the aftermath of the recent financial crisis and resulting economic downturn,” said BMI’s chairman Sheikh Khalid bin Mustahail al-Mashani and Al-Salam’s head Shaikha Hessa bint Khalifa bin Hamad al-Khalifa in a joint statement.

The merger is subject to obtaining the companies’ shareholder approval and seeking the necessary regulatory consents.

Following the announcement, Al-Salam’s share price on Dubai Financial Market’s (DFM’s) General Index shot up 10.1 per cent to AED0.97 ($0.26)s.