The boards of directors at National Bank of Abu Dhabi NBAD.AD and First Gulf Bank FGB.AD have recommended merging the two lenders, a joint statement said on Sunday, with the deal expected to be completed in the first quarter of 2017.

The tie-up is one of two significant consolidation efforts currently underway in the emirate as it reacts to the lower oil price environment: last week, the government ordered the merger of state investment funds Mubadala and International Petroleum Investment Company.

Retaining the brand name National Bank of Abu Dhabi, the merger will create one of the largest banks in the Middle East and Africa, with assets of 642 billion dirhams, a return on equity of 14.1 percent and a market value, as of June 30, of $29.1 billion.

"The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAE’s economic ambitions at home and drive the country’s growing international business relationships," the statement said.

The bank merger will be completed via a share swap agreement which would result in shareholders of FGB receiving 1.254 new NBAD shares for every one FGB share they currently hold.

FGB shareholders will control around 52 percent of the combined bank, with the Abu Dhabi government and related entities holding 36.9 percent in total.

Abdulhamid M. Saeed, a board member and managing director at FGB, has been named chief executive designate for the combined lender, with FGB chairman Sheikh Tahnoon bin Zayed al-Nahayan named as chairman designate.

A new board and management will take over once the merger has been completed, while the existing CEOs - Alex Thursby of NBAD and Andre Sayegh of FGB - will continue to run the independent banks up until the merger completes. There was no reference to their future roles in the combined bank.

The merger will deliver cost savings of around 500 million dirhams annually, with the benefits to be realized over three years. There will be one-off integration costs of around 600 million dirhams, the statement added.

Credit Suisse and UBS are acting as financial advisers to NBAD and FGB respectively.