DUBAI (Reuters – HSBC Bank Oman announced on Sunday that it will hold preliminary discussions with Sohar International Bank, a local rival bank after Sohar last week suggested a cash and share deal to combine the two banks.

The unit of UK-based HSBC Holdings (NYSE 🙂 stated that it has reviewed the Sohar letter of intent and will engage in preliminary talks to get more details about the offer.

The statement added, “If parties agree to merge it will be subject… to approval by relevant regulatory agencies and shareholders at each bank’s extraordinary general assembly.”

Sohar did not provide any details about the terms of the possible offer. It stated that the board decided to investigate the possibility for a cash-and-shares deal subject to approvals.

Any such combination will be made amid consolidation in the Gulf region, as profit margins are being squeezed by reduced government spending and banks trying to grow regionally.

Saudi Arabia’s most important lender National Commercial Bank (NCB), has been merged with Samba Financial Group, to create Saudi National Bank. The bank now holds more than $240 billion in assets.

Two major bank mergers have occurred in Abu Dhabi.

As of the closing, HSBC Oman had a market capitalization of $587 million. On Sunday, its shares surged 9.7%. Based on data from Refinitiv Eikon, Sohar has a market worth of $816 million. The shares of Sohar were almost 1% lower.

Since 1948, HSBC has operated in Oman.

($1 = 3.7521 riyals)