Spain’s CaixaBank, Bankia green light mega merger

MADRID (AFP) – Directors from CaixaBank and Bankia on Thursday approved their merger into Spain’s biggest lender in a move which will transform the landscape of Spanish banking.

A source close to the deal said the board of directors of both banks approved the merger, details of which will be made public soon.

The negotiations involved Bankia’s biggest shareholder, the Spanish government.

The merger creates the country’s largest bank with combined assets of around EUR664 billion (USD787 billion) in Spain, Renta 4 Banco analysts said, putting the new entity ahead of Santander or BBVA, both of which have a more international presence.

Under terms of the deal, shareholders in CaixaBank, Spain’s largest domestic bank, would hold 75 per cent of the new entity, while Bankia shareholders would take the remaining 25 per cent.

The Spanish state, which currently holds just under 62 per cent of Bankia, will hold a 14 per cent share in the new group, press reports said. In 2012, the Spanish government stepped in to save Bankia from collapse, spending EUR22 billion (USD26 billion at current exchange rates) to bail out a bank that was seen as a symbol of financial excess at a time when the Spanish economy was mired in crisis.

The huge merger comes in a very difficult economic context for Spain which has been particularly badly hit by the coronavirus pandemic, with gross domestic product (GDP) collapsing by 18.5 per cent in the second quarter.

The deal should enable the two banks to reduce costs and offers them “a way of trying to improve profitability,” said Xavier Vives of the IESE Business School.

Another advantage of the merger is the geographical footprint of each bank, with Bankia more present in Madrid and in the centre of the country, while CaixaBank is well-established in the northeastern Catalonia region, said banking specialist at ESADE business school Robert Tornabell.