Kvika banki, an Icelandic lender bank, has proposed a merger with its larger domestic rival Islandsbanki.

The board of Kvika has written to Islandsbanki to suggest the idea, which it said would “create a strong financial institution with an optimal revenue combination.”

The partly state-owned Islandsbanki is one of three major banks in Iceland, and was subject of the country’s largest ever IPO when the state sold a third of its stake in 2021.

In its statement, Kvika said: “The merged company could provide its customers with diversified services and would contribute to increased competition in the financial market through fintech and other solutions, as well as being an interesting investment opportunity.”

The bank added that “at the current stage it is not deemed timely to decide which company would be the acquiring entity, or to what extent, the companies’ subsidiaries would merge,” saying that this would “depend on a comprehensive assessment of commercial, tax and competition matters which would be performed if formal discussions commence.”

In a separate statement, Islandsbanki confirmed it had received the letter and that it would make a decision on how to proceed next week.

This is the latest step of expansion for Kvika banki after its merger with TM and Lykill under the one brand in 2021.The bank’s board recently approved a significant change to its organisational chart. This included the appointment of Sigurður Viðarsson, CEO of TM, as deputy CEO of Kvika banki, with existing deputy CEO Ármann Þorvaldsson focusing on development of Kvika’s operations in the UK.

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