The banks' combined assets will be about £E 135,000 million ($23,600 million). No timeframe for the merger has been given. The move is part of a government initiative to restructure and consolidate the local banking sector.

However, the announcement to merge the two giant state-owned banks has raised eyebrows. Analysts have pointed out that both banks are undercapitalised, suffer from a high number of non-performing loans, inefficiencies, poor asset quality and overstaffing. 'It is not clear why the government would take such a step now,' says Ahmed el-Ashram, financial analyst at the local HC Brokerage. 'The odds of privatisation are lower now as it will take a longer time.'