DUBAI: Qatari lenders Barwa Bank and the International Bank of Qatar (IQB) have reached a final merger agreement, creating a combined group with total assets of 80 billion riyals ($22 billion), the banks said on Tuesday.

The unlisted banks will work to complete the necessary steps for the merger, including obtaining regulatory approval, before the end of the year, according to the statement carried on Barwa's website.

The deal creates a sharia-compliant financial institution, with a shareholder equity base of over 12 billion riyals ($3.30 billion), the statement said.

Reuters reported in June that the two lenders were in advanced talks after a three-way merger with Islamic lender Masraf Al Rayan fell through. 

A shake-up has long been mooted in the Qatari banking sector, where 18 local and international commercial banks serve a population of around 2.6 million.

Barwa and IQB said they have appointed a management consultant to develop an integrated plan for the two banks, which included increasing revenue and reducing costs. The statement did not identify the consultant.

Credit Suisse advised Barwa on the transaction, and IBQ was advised by Perella Weinberg.

($1 = 3.6400 Qatar riyals)

(Reporting by Alexander Cornwell, editing by Louise Heavens) ((Alexander.Cornwell@thomsonreuters.com;))