The merger is part of government plans to consolidate the local banking industry, which is mostly state-owned, and make banks stronger before gradually selling off many of them in the coming years. Slovenia, which is a euro zone member, hopes the new bank will attract stronger investor interest than Banka Celje on its own. The country has been trying to sell Banka Celje for several years.

Finance Minister Dusan Mramor has said the merged bank would be sold by July 2019. The merged group, to be known as Abanka d.d., will be based in Ljubljana and will focus mainly on retail customers and small and medium-sized companies, the two banks said.

Both banks received a sizeable capital injection from the government last year as part of a general bank overhaul that allowed Slovenia to narrowly avoid an international bailout in 2013.

The country plans to sell other state-owned commercial banks in a major privatisation push after successive governments resisted selling them off. About 60 percent of the banking sector is in state hands. But the government decided last week it would remain the main stakeholder in Slovenia's largest bank, Nova Ljubljanska Banka and hold on to at least 25 percent of the bank in the long run. Slovenia's number two bank, Nova KBM, is expected to be sold in the coming weeks.

Reuters