Abu Dhabi’s merger of three state-linked banks is set to create two new lenders, according to people with knowledge of the matter.

Under plans being discussed, Abu Dhabi Commercial Bank PJSC would acquire Union National Bank PJSC to form a conventional lender, the sources said, under condition of anonymity. The Islamic divisions of ADCB and UNB would merge and then take over the privately-held Al Hilal Bank, they said.

The emirate, which combined two of its largest banks last year to create the Middle East’s second-biggest lender, plans to set up a holding company to manage the new entities, which would operate under separate banking licences.

Mubadala Investment Co., which holds a 62.5 per cent stake in ADCB and 50 per cent of UNB through Abu Dhabi Investment Council, and ADCB declined to comment. UNB and Al Hilal Bank didn’t immediately respond to requests for comment. Abu Dhabi Investment Council fully owns Al Hilal Bank.

Consolidation among Abu Dhabi institutions has been picking up following the slump in crude prices. National Bank of Abu Dhabi and First Gulf Bank merged last year to create First Abu Dhabi Bank PJSC. A tie-up between Mubadala and the Abu Dhabi Investment Council in March created a sovereign wealth fund with about $220 billion (Dh807 billion) of assets.

The UAE is home to more than 9 million people and has almost 50 banks, including the local units of Citigroup Inc. and HSBC Holdings Plc.