HSBC is in talks with Oman International Bank over a sale of its operations in the Gulf Arab state, a source at the Omani bank said, as the British lender looks to streamline its Middle East presence.
"OIB is negotiating the acquisition of HSBC's operation in Oman," a senior OIB official said.
"They have five branches and one customer service department. We have offered a financial package which they are considering."
Both HSBC and OIB had earlier issued statements saying the two parties were in talks about "merging their operations" in Oman without providing any additional details.
A separate source, speaking on condition of anonymity, said OIB would consider a share-swap agreement, and added that no external advisers were involved in the deal.
HSBC said the lender had no plans to exit its operations in the country.
"HSBC has been in Oman since 1948, and has absolutely no plans to exit the country. We are in early stage negotiations over a possible merger of our operations in Oman with those of OIB," a spokesman for the company said in an emailed statement.
HSBC is reviewing its Middle Eastern operations, with the UAE becoming a regional hub and other countries having their operations reduced.
The reorganisation is affecting Oman, as well as Bahrain, Jordan, Lebanon, Qatar and the UAE.
HSBC has operated in Oman since 1948 and the head of its securities business was quoted by Omani media this week as saying the British lender had a long-term commitment to Oman and the Middle East.
Oman opened its doors to Islamic banking and let conventional lenders run sharia-compliant operations in May.
The country witnessed protests against government earlier in the year, inspired by a wave of rebellion that toppled Egypt and Tunisia's leaders and roiled much of the Middle East.
Shares in HSBC were up 4.4 percent on the London stock exchange, part of a rally in European bank shares. OIB shares closed 0.8 percent higher on the Muscat bourse before the announcement.