The combined entity is expected to become the biggest bank in the Middle East with about $170bn in assets.
NBAD in a filing on the Abu Dhabi stock market said: "NBAD and FGB have commenced discussions regarding the possibility of a merger of the two banks or a combination of the two businesses."
The potential merger could emerge as the second largest bank in the Middle East after Qatar National Bank (QNB) with a combined market share of 21.5%, Gulf News reported.
Following the merger, the market capitalization of the new entity is estimated to reach $26bn compared to $31bn of QNB.
It is also expected to result in cost savings and reduce funding costs.
The bank said: "Each bank has formed a Working Group made up of senior executive management to review the commercial potential along with any legal and structural aspects of a merger or combination."
NBAD said that there is no certainty that discussions between the two banks will lead to a merger or combination.
Both the banks had reported profit decline for the first quarter of this year amid falling oil prices and a reduction in government spending.
While FGB’s net profit dropped 6% in the quarter, NBAD posted 11% decline.
Currently, NBAD has 110 branches in UAE and its international network consists of about 47 branches and offices in 16 countries.
Established in 1979 and headquartered in Abu Dhabi, FGB one of the largest equity based banks in the UAE. It has branches in Singapore and Qatar, representative offices in India, Hong Kong, United Kingdom, Seoul-Korea and a subsidiary in Libya.
Image: National Bank of Abu Dhabi, UAE. Photo courtesy of Ijanderson977/Wikipedia.
