Masraf Al Rayan (MAR), a Qatar-based Islamic bank and parent company of Al Rayan Bank, has reportedly agreed to merge with Al Khalij Commercial Bank.

The merger is expected to create the second-largest bank in Qatar, Bloomberg reported.

The banks agreed to a share-swap deal. Under the deal terms, Al Rayan will issue 0.5x shares for each Al Khalij share held.

The deal is valued at QAR8.2bn ($2.2bn), according to Bloomberg calculations.

In a statement, the lenders said that the transaction represents a 21% premium over the closing price of Al Khalij on Tuesday, 5 January 2020.

They added that the combination will “create a larger and stronger financial institution with a strong financial position and significant liquidity available to support Qatar’s economic growth.

“It will create one of the largest Shariah-compliant banks in the State of Qatar and in the Middle East.”

By merging with Al Khalij, Al Rayan outranks two of its competitors, with $47bn in total assets, which is six times less than the assets of first largest lender Qatar National Bank.

Al Khalij and Al Rayan’s merger talks first began in June 2020, when banks in the Gulf were looking to combine their operations, to cope with lower oil prices and the Covid-19 pandemic.

Currently, Qatar has a total of 20 local and international banks serving as many as 2.5 million people in the country, the Bloomberg report added.

Recent Gulf deals

In November, Dubai’s Emirates NBD was in talks with the management team of Lebanon’s Blom Bank to buy its business in Egypt.

In September, Bank Leumi signed memorandums of understanding (MoUs) with First Abu Dhabi Bank (FAB) and Emirates NBD.

In the same month, Emirates NDB inked an MoU with Israel’s Bank Hapoalim.

Jordan-based Capital Bank commenced due diligence to buy Lebanon-based Bank Audi’s businesses in Jordan and Iraq.