RBS, HSBC Saudi units studying possible merger

HSBC and RBS´s partially-owned Saudi units were exploring a potential merger which would result in the creation of the Kingdom's third-largest lender.

Alawaal Bank, 40%-owned by RBS, is planning to start talks with HSBC's Saudi British Bank, the lender said in a statement.

A merger would create a lender with roughly $78.0bn of assets and become the third-largest in Saudi Arabia.

The news comes amid a wave of consolidation which is sweeping across that sector in the Middle East, as banks battle sustained low oil prices and slower economic growth.

RBS has long been trying to sell its stake, currently valued at about $1.3bn, in Alawaal.

Alawaal and SABB are also facing a sharp rise in non-performing loans made to the construction sector.