Two midsize South Korean banks plan to merge, creating the seventh-largest commercial bank in the country.

According to the Associated Press, Hana Bank and Boram Bank, the nation's 11th- and 13th-largest banks, signed a letter of intent to merge Jan. 4. The combination would have $29.4 billion of assets.

The merger agreement is the second between Korean commercial banks announced this year. The first was the July pact between Hanil Bank and the Commercial Bank of Korea.

Experts said the Hana-Boram merger would have a positive effect on the banking system, because both banks are relatively healthy. The partners in the other deal are weaker, analysts said.

"It is a good sign that two relatively healthy banks are merging," said Woo Jong-taek, an analyst at Daishin Securities Co. "It will stimulate reforms in other banks."

The latest deal is also expected to encourage the government in efforts to restructure the bad-debt-ridden banking industry.

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