Liberbank and Ibercaja announce merger to create Spain’s seventh-biggest lender

Popular Español negotiating the sale of its internet banking unit to meet provisioning requirements

Liberbank announced late on Tuesday that it will merge with Ibercaja in a move that will create the seventh-biggest lender in Spain with assets of 116 billion euros, and a combined branch network of 2,500 offices and over 12,000 employees.

The Asturian Liberbank includes the former public savings banks Cajastur, CCM, Caja Cantabria y Caja Extremadura, while the Ibercaja group now holds CAI, Caja Círculo de Burgos and Caja de Bajadoz. Spain's smaller banks are under pressure to group together to meet the new provisioning requirements imposed by the government.

A decree passed by the administration in February requires banks to put aside some 54 billion euros to cover potential losses from problematic assets related to the moribund property sector. A second decree early this month imposed further provisions of around 30 billion to cover assets that are currently performing.

Separately, Banco Popular Español confirmed on Tuesday that it was negotiating the sale of a majority stake in its internet banking unit to meet the new provisioning requirements. Popular, which is in the process of absorbing Banco Pastor, estimates it needs 2.6 billion euros.

The number of players in the Spanish banking system has fallen from 48 in 2009 to 14. However, CatalunyaCaixa, Novagalicia and Banco de Valencia, which have all been taken over by the Bank of Spain, are expected to be sold to other lenders or to be absorbed into one large public bank with Bankia.

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