Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank have reached an agreement to merge their banking operations to create a $114bn lender.

The merged entity will be the third-largest in the lender in the United Arab Emirates and the fifth largest in the Gulf Cooperation Council (GCC).

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Abu Dhabi banks merger: Details

Under the terms of the deal, Abu Dhabi Commercial Bank (ADCB) will issue 0.5966 shares for every Union National Bank (UNB) share. Overall, it will issue a total of 1.64 billion new shares to UNB shareholders, Reuters reported.

The boards of ADCB and UNB have already approved the merger, which now requires shareholder approval.

Following the completion of the merger process, the merged entity will operate under ADCB brand name, while UNB shares will be delisted from the Abu Dhabi Securities Exchange, the news agency added.

The combined entity will then acquire Al Hilal Bank for $272m. It will issue a mandatory convertible note for up to 117.6 million post-merger ADCB shares to Abu Dhabi Investment Council (ADIC), the parent company of Al Hilal.

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A government investment arm, ADIC is also the majority shareholder in ADCB and UNB.

Al Hilal Bank will operate independently as an Islamic lender within the merged entity.

Since September last year, the lenders were in discussions for a three-way merger in order to increase profitability.

Currently, multiple lenders in the Gulf region are pursuing consolidation due to fluctuating oil prices and decelerating economic growth.