Saudi British Bank (SABB) and Alawwal Bank have agreed a merger that would create Saudi Arabia’s third-biggest bank with assets of around $77 billion.

The agreement, which involves SABB acquiring the smaller Alawwal for 18.6 billion riyals ($4.96 billion), is the first major banking tie-up in the kingdom for around 20 years and comes as Saudi Arabia embarks upon a plan to transform the economy and cut its dependence on oil revenues.

Based on the preliminary agreement, Alawwal shareholders would receive 0.485 SABB shares for each Alawwal share. Progress on the merger had taken longer than expected partly because the regulatory environment for bank acquisitions in Saudi Arabia is relatively untested.

For both lenders, the merger would create a win-win situation. The combined entity is expected to reach 5.9 billion riyals annually.