CORRECTED-Kuwait Finance House studying merger with Ahli United Bank

(Corrects JULY 18 story to remove reference to KIA planning to sell KFH stake as sale has been delayed)

DUBAI, July 18 (Reuters) - Kuwait Finance House (KFH) is looking to merge with Bahrain’s Ahli United Bank , Kuwait’s biggest Islamic lender said in a statement on Tuesday, confirming an earlier media report.

The Gulf’s banking sector is consolidation as three years of low oil prices squeeze deposits and push up bad loans.

“The merger is currently only under study and there has been no agreement so far, and this would be a positive step if it closed with the right price,” KFH Chief Executive Mazin Al-Nahedh was quoted as saying in Kuwait’s Arabic language Al-Qabas newspaper.

In other regional bank mergers, First Abu Dhabi Bank , one of the largest banks in the Middle East and Africa, was recently created in the United Arab Emirates after a tie-up between two Abu Dhabi lenders, while mergers are under way in Qatar and Saudi Arabia.

Ahli United Bank is Bahrain’s largest lender and has a presence in Kuwait, Egypt, Iraq, Oman, Libya and the United Kingdom either directly or through affiliates, according to its website.

KFH said in the statement that it is looking at a range of alternatives to boost its profitability, adding that such decisions require approval from regulators, including the central bank. (Reporting by Hadeel Al Sayegh, editing by Louise Heavens)