Abu Dhabi Commercial Bank (ADCB) agreed to merge with Union National Bank PJSC and Al Hilal Bank to create the Gulf’s fifth-biggest lender with about $114 billion in assets.

ADCB offered 0.5966 share for every UNB share, according to a statement. The combined entity will buy privately-held Al Hilal Bank for about 1 billion dirhams ($272 million) by issuing a mandatory convertible note. The deal is expected to close in the first half.

The merger “makes a lot of strategic sense,” said Richard Segal, a senior analyst at Manulife Asset Management in London. “The first-half closing timetable seems ambitious, unless some of the preliminary work has already been undertaken.”

Abu Dhabi, home to 6 percent of global oil reserves, has stepped up efforts to create leaner and more competitive financial institutions. The merger would follow a tie-up between Abu Dhabi’s two biggest banks in 2017 and the combination of sovereign wealth funds in March. There are almost 50 banks operating in the United Arab Emirates serving a population of about 9 million, compared with 28 lenders in Saudi Arabia catering to more than 30 million people.

Abu Dhabi Commercial Bank shares have gained 26 percent since Sept. 3 when it confirmed merger talks. Union National Bank, which on Monday said its chief executive officer is retiring, advanced 37 percent. Al Hilal Bank is owned by state-controlled Abu Dhabi Investment Council.

More from the statement:

ADCB Chairman Eissa Mohamed Al Suwaidi becomes chairman designate of the new banking group and Mohamed Bin Dhaen Al Hamli vice chairman designate ADCB CEO Alaa Eraiqat becomes group CEO designate Al Hilal Bank to be taken over via a mandatory convertible note of up to 117.6 million post-merger ADCB shares to Abu Dhabi Investment Council New banking group will carry the ADCB identity Al Hilal Bank will retain its existing name and brand, and operate as a separate Islamic banking entity within the group The combination is expected to deliver cost synergies of about $167 million annually on a run-rate basis Advisers: Barclays, Allen & Overy and KPMG were advisers to ADCB; JPMorgan, Clifford Chance and EY were advisers to UNB Link to statement

“The synergy achievement will come via efficiency in operations, which will require the banks to cut down on redundancy,” said Joice Mathew, the head of equity research at Muscat-based United Securities. “However, this being a retail-focused bank, I think they might try to keep the job cuts to a minimum.”

A proposed merger may lead to about a thousand jobs being cut, three people with knowledge of the matter said in December.

In the Gulf region, lower oil prices over the past four years are forcing banks to consolidate for scale and to better compete in a crowded market. Subdued credit growth, a squeeze on deposits, higher cost of funds and deteriorating asset qualities are driving consolidation in the regional banking sector.

In Saudi Arabia, National Commercial Bank is in talks to merge with Riyad Bank to create the Gulf’s third-largest lender with $182 billion in assets. Kuwait Finance House last week offered to buy Bahrain’s Ahli United Bank BSC in a share-swap deal, a potential combination that would create the Gulf’s sixth-biggest lender with $92 billion in assets.

“The industry is looking at more viable options to improve efficiencies” after the merger of National Bank of Abu Dhabi and First Gulf Bank, said Vishal Gupta, a fund manager at Rasmala in Dubai. “We could see more consolidation not only within banks but maybe in other industries such as insurance, airline and other sectors like real estate.”

Gulf banks in merger talks:

Saudi National Commercial Bank, Riyad Bank: Story here Kuwait Finance House, Ahli United Bank: Story here National Bank of Bahrain, Bahrain Islamic Bank: Story here Bank Dhofar, National Bank of Oman: Story here Alizz Islamic Bank, Oman Arab Bank: Story here