Qatar’s Al-Khalij Commercial Bank, Ahli Bank and International Bank of Qatar are in talks to merge together, which could create a banking entity with assets worth more than $30bn.

The talks are at an early stage, according to new agency Reuters, which cited three unnamed people with knowledge of the matter. If the lenders decide to go ahead for a three-way merger, it will be a rare sign of consolidation in an over-banked market. Financial industry in the gas-rich peninsular Gulf state is controlled by powerful local shareholders, who are traditionally reluctant to cede control.

For Qatari banks grappling with the impact of lower oil prices, there is a growing need for such a merger. Around 18 local and international lenders currently service Qatar’s population of 2.4 million.

Calls and emails by Reuters to representatives of all three banks were not answered.

Reuters estimate that the merged entity would have assets worth more than 120 billion riyals ($33 billion), putting it on a par with Commercial Bank of Qatar, the country’s third-largest lender by assets.

There is no guarantee any agreement will be reached and no advisors have been hired yet, according to Reuters. Al-Khalij Commercial Bank and IBQ were the last to attempt a merger but the deal failed in June 2011 after more than a year of talks.

The three banks are currently trying to garner support from their major shareholders. If they succeed, the banks could then move on to technical aspects of combining their businesses, according to one person.

Al Khaliji, the largest of the three lenders, is 39.99 per cent-owned by the Qatar Investment Authority (QIA) sovereign wealth fund. Ahli Bank is 29.4 per cent held by Qatar Foundation, a state-owned investment vehicle traditionally focused on science and education, which bought its stake from Bahrain’s Ahli United Bank in 2013.

The unlisted IBQ has Sheikh Hamad bin Jassim al-Thani, the former prime minister and head of QIA among its shareholder, who also serves as chairman of the bank.

While complex, a three-way combination is feasible and would create potential benefits for all three, as well as the banking sector in general, Reuters cited a senior Qatari banking industry official as saying. “The banking sector is too fragmented in Qatar so the central bank should welcome consolidation. It could reduce the need for them to prop up the smaller banks if times get tough,” the official said.