La Caixa buys Banca Cívica to create Spain’s biggest bank in terms of assets

La Caixa has agreed to buy Banca Cívica through a share swap with its commercial banking arm Caixabank, which values its smaller rival at about one billion euros, becoming in the process Spain’s biggest lender in terms of assets.

Caixabank’s offer values Banca Cívica, an amalgam of four savings banks that listed last year, at 1.97 euros per share, a discount of 11.3 percent to its closing share price on Friday of 2.22 euros. Trading in both Caixabank and Banca Cívica’s shares was suspended Monday by the National Securities Commission (CNMV). Compared with Banca Cívica’s listing price of 2.70 euros per share, La Caixa’s offer is at a 27 percent discount.

The tie-up of the two lenders will create a bank with assets of 340 billion euros, more than Banco Santander and BBVA. It will have a branch network of 6,590 offices and a workforce of 32,715. However, experts estimate that La Caixa is likely to make cuts of around 10 to 15 percent both in the number of outlets and staffing levels.

The closure of the deal was reached after a marathon session of meetings on Monday of the boards of the four savings banks that make up Banca Cívica, and the boards of Banca Cívica and La Caixa.

The imperative behind Banca Cívica’s tie-up was the difficulties it would face in securing the 2.031 billion euros it needs to increase its provisions for potential losses from real estate assets on its books as dictated by the government, which wants further consolidation to take place in the sector.