DUBAI, June 3 (Reuters) - Bahrain's Khaleeji Commercial Bank

KHCB.BH said on Monday it was evaluating a potential merger with fellow Bahrain-based lender Bank Al Khair, the latest in a spate of tie-ups in the kingdom's banking sector.

The two Islamic banks have set up a committee which would study the feasibility of a merger, with any agreement subject to due diligence and receiving approvals from shareholders and the regulator, Khaleeji said in a bourse filing.

No value for the potential new entity was given, nor a timeframe of how long the study would take.

It is the latest merger announcement in Bahrain, with banks encouraged to consolidate by the central bank to strengthen the system in the wake of a local real estate crisis and political uprisings in the tiny island nation.

(Reporting by David French; Editing by Bernardo Vizcaino)

((davidj.french@thomsonreuters.com)(+971 4 362 5864)(Reuters Messaging: davidj.french.thomsonreuters.com@reuters.net))

Keywords: BAHRAIN KHALEEJI/MERGER