Saudi British Bank (Sabb) and Alawwal Bank (formerly Saudi Hollandi Bank) have secured board approval for their proposed merger that will create Saudi Arabia’s third-largest bank with SR271bn ($72bn) in assets.

Saudi businesswoman Lubna al-Olayan will lead a new lender. She has been the deputy chairwoman of Alawwal Bank for four years.

The Al-Olayan family is a prominent merchant family in the kingdom. It is a common shareholder of the Saudi banks. It controls 21.76 per cent of Alawwal Bank and 16.98 per cent of Sabb. The government of Saudi Arabia also owns 10.5 per cent of Alawwal and 9.74 per cent of Sabb.

Royal Bank of Scotland (RBS) controls a 40 per cent stake in Alawwal Bank, through its 2007 acquisition of ABN Amro. RBS’ stake in the lender has been on the block for sale for some time as the bank reduces its presence in international markets. HSBC owns 40 per cent of Saudi British Bank.

Saudi Arabia’s economy has slowed since mid-2014 as a result of lower oil prices. Most banks in the kingdom have reported weaker earnings in recent quarters and tighter profit margins on the back of rising provisions for bad loans, especially on contracting and corporate sector debts.