HSBC Holdings PLC said Wednesday it will combine its Omani division with local lender Oman International Bank in a deal that will give it control of just over half of the new company.
London-based HSBC, Europe's biggest bank by market value, plans to inject up to $97.4 million into its existing Oman operations ahead of the deal. It will control 51 percent of the combined bank, which will be named HSBC Bank Oman.
Under the terms of the deal, HSBC will provide support services to the combined bank for at least 10 years.
"This transaction presents HSBC with a great opportunity to invest for growth in a key Gulf economy. With over 60 years' presence in the country, we recognize the tremendous business opportunities in Oman," Simon Cooper, deputy chairman and CEO of HSBC's Middle East operations, said in a statement.
Oman's financial sector is overshadowed by those of Gulf neighbors Saudi Arabia and the United Arab Emirates, the two biggest Arab economies. But the once sleepy sultanate is developing rapidly, and ranks as the top Mideast oil exporter that is not part of OPEC.
Murad Ansari, an analyst for Mideast bank EFG Hermes in Riyadh, Saudi Arabia, said bank lending in Oman is picking up as the government plans for further investment in infrastructure.
"This should mean that loan growth demand and opportunities for growth remain strong in Oman," he said.
OIB is Oman's fifth largest bank, with $3.2 billion in assets at the end of last year, according to HSBC.
Ansari said HSBC will benefit from OIB's larger deposit base.
"HSBC on its own had relatively smaller operations in Oman. With this merger, they will become among the biggest players in the sector with the second largest branch network in Oman," he said.
Regulators and OIB shareholders must still approve the deal, which HSBC hopes to complete by the end of June.