* GFH recovering from global financial crisis
* Combined entity would have assets of $3.3 bln -Reuters data
* Bank Al Khair had previously discussed merger with GFH unit
* No financial details provided
* Any deal subject to due diligence, approvals (Adds details, context)
By Tom Arnold
DUBAI, Aug 22 (Reuters) - Bahrain-based Islamic investment bank GFH Financial Group (GFH.DU>, a casualty of the global financial crisis, has signed a memorandum of understanding to buy a majority stake in Bahrain's Bank Al Khair, the latest sign it is back in expansion mode.
In a statement on Monday, GFH didn't give any financial details but said the acquisition, if it went ahead, would "create a larger financial group having banking operations within GCC (Gulf Cooperation Council), UK, Malaysia, Turkey, Pakistan and India".
Founded in 2004, Bank Al Khair is an Islamic bank with total assets of $580.5 million as of March 2016, according to Thomson Reuters data. GFH has assets of $2.70 billion, the data shows.
Crippled during the global financial crisis in 2008, GFH went through several debt restructurings and is now positioning itself as a financial holding company.
It revealed plans in May to list its Bahrain subsidiary Khaleeji Commercial Bank in Dubai and said it would acquire a financial services company to increase shareholder value.
In June 2013, Khaleeji Commercial and Bank Al Khair signed a memorandum of understanding to evaluate the feasibility of a merger between them, but the plan was dropped in early 2014 after they failed to agree on terms.
Bahrain's central bank has been encouraging smaller lenders to merge to strengthen themselves after a local real estate crash and fall-out from the island kingdom's political unrest.
GFH's acquisition of a stake in Bank Al Khair is subject to approval by the boards of directors and shareholders of the banks, as well as completion of due diligence and regulatory approvals, Dubai-listed GFH said, adding that the structure of the acquisition also had to be agreed.
The acquisition would benefit shareholders of the combined entity, although the impact on GFH's financial position cannot be measured at the moment, it added.
GFH has been buying assets actively since last year. Last October it agreed to acquire a U.S. industrial real estate portfolio in a deal worth $125 million, and in May last year it said it would buy a mall in the Saudi Arabian city of Jeddah for $48 million.
Earlier this month, GFH said it had repaid $45 million worth of debt, bringing its total syndicated liabilities down to $105 million. In 2008, it had liabilities of over $1 billion. (Editing by Andrew Torchia)