The three state-owned banks, Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI), along with their sharia subsidiaries, Bank Syariah Mandiri (BSM), BNI Syariah and publicly listed BRI Syariah signed a conditional merger agreement (CMA) on Monday.

BRI Syariah will be the surviving entity as its publicly listed status will simplify the merger. The company's stocks, traded on the Indonesia Stock Exchange (IDX) under the code BRIS, soared almost 25 percent as of 11:56 a.m. Jakarta time on Wednesday. The stocks have gained 616.84 percent so far this year.

“This CMA signing is the start of the merger. We will continue our preparations so that the merger could hopefully be completed by February of next year,” Bank Mandiri vice president director Hery Gunardi, who is also in charge of the merger, said during a virtual press briefing on Tuesday.

After the integration, he went on to say, the sharia bank planned to strengthen its wholesale business by becoming an adviser for global sukuk issuance for prospective Indonesian companies.

The government has long floated the idea as it aims to create a stronger sharia bank to provide larger funding for the country’s economic recovery and to help improve the Islamic finance industry.

Despite being a Muslim-majority country, Indonesia has been struggling to advance its sharia finance and lags behind neighboring Malaysia.

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