Al Baraka Bank (Pakistan), the Pakistani arm of Bahrain’s Al Baraka Banking Group, has agreed to merge with Pakistan's Burj Bank to create a single Islamic bank in Pakistan.

The combined entity will operate under the name Al Baraka Bank (Pakistan), and will oversee total assets of more than $1.1bn.

A total of 74 Burj Bank branches will be converted into Al Baraka Bank (Pakistan) branches to create a combined network of 224 branches across more than 100 cities in Pakistan.

As per the agreed terms of the deal, Burj Bank shareholders will receive fully paid shares in ABPL in the ratio of 1:1.7.

Al Baraka Islamic Bank-Bahrain, part of the Al Baraka Banking Group, will remain a major shareholder in the combined entity.

Al Baraka Bank (Pakistan) chairman and Al Baraka Banking Group (BSC Bahrain) president and CEO Adnan Ahmed Yousif said: “This step carries substantial benefits in terms of operating capability, expanded domestic coverage, and revenue generation which would eventually be passed on to the shareholders in the form of improved profit earnings and better gains in the form of share prices. The amalgamated entity would be in a position to offer varied financial products and services.

“The amalgamation would lead to increased asset base and size of the combined entity in terms of capital and reserves. This would in turn give management access to more external funds at competitive rates. The increased equity would provide greater comfort to rating agencies. Access to greater resources will improve growth prospects and amalgamated entitys ability to undertake large assignments. A larger client base with varied financial products to offer should give the amalgamated entity a competitive edge over its competitors.”

 The merger has already secured the nod of shareholders of the two banks last month, and is now subject to regulatory approvals. The merger is expected to be effective from the last quarter of 2016.