Bahraini islamic banks Capivest, Elaf Bank and Capital Management House are set to vote on a potential three-way merger later this month.
Kuwait Finance House-Bahrain, acting as transaction advisor, said the vote would take place at shareholder meetings to be held by the end of June.
If approved, the newly created entity will have a shareholders' equity of almost $350m and assets in excess of $400m, a statement said.
The transaction is the first three way merger proposal to take place in Bahrain, the statement added.
In addition to shareholder approval, the merger is subject to regulatory approval and is expected to be completed in the second half of this year.
The proposed merger was announced in September last year and the three banks have been meeting regularly to discuss the details of the transaction. The due diligence and valuation exercise has already been formally completed.
The merger may prove to be a model and a catalyst to further mergers in the Bahrain Islamic Banking market, KFH said in the statement.
Abdulhakeem Alkhayyat, managing director and CEO of KFH-Bahrain, said: "The merger is expected to be transformational for the three banks and it is anticipated to bring significant benefits to their potential customers, shareholders and wider stakeholders in the Kingdom of Bahrain.
"This merger will strengthen the banks' capital bases and will result in creating a stronger financial institution with a diversified shareholder mix."
In February, Bahrain Islamic Bank ended talks with Al Salam Bank over plans to merge to create a new $4.5bn entity.
The banks “agreed to end merger talks after they were unable to reach an agreement on the exchange ratio for the shares,” according to a statement.