BANKING SECTOR

CaixaBank, Bankia in talks for merger that would create Spain’s biggest lender

The new bank would hold €650 billion in assets, although it would lack the international presence of other Spanish giants such as Santander and BBVA

A merger of Bankia and CaixaBank would create Spain's biggest lender.
A merger of Bankia and CaixaBank would create Spain's biggest lender.

Bankia and CaixaBank are considering a merger that would create the biggest lender in Spain, the banks said in a Thursday statement to the securities market watchdog CNMV.

The new bank would hold €650 billion in assets, although it would lack the international presence of other Spanish lenders such as Santander and BBVA.

The move comes amid a general consolidation process in the Spanish banking sector as lenders shore up their provisions to deal with the impact of the Covid-19 crisis.

Mergers are a way to become more efficient, but there is also a management risk involved
Bankia chairman José Ignacio Goirigolzarri in a June interview

If the deal is finalized, the Spanish state – which currently holds 61.8% of Bankia after the latter was bailed out in 2012 – will have a 14% stake in the new entity. The new lender’s main shareholder would be La Caixa Foundation with around 30%. The operation is still pending government approval.

The story was initially reported by the online daily Ara on Thursday, and later confirmed by Bankia and CaixaBank.

The BFA-Bankia group was bailed out in 2012 by the state, which injected €22.4 billion to save the struggling lender at a time when Spain was still reeling from the effects of the 2008 financial crisis, compounded by a huge property crash. Eight years later, barely €3.3 billion has been recovered.

Both the Bank of Spain and the European Central Bank have been pressuring for consolidation to counter the effects of the coronavirus crisis on lenders’ balance sheets.

The resulting bank would be headed by Bankia chairman José Ignacio Goirigolzarri and by CaixaBank CEO Gonzalo Gortázar, who stand to become the new chairman and CEO of the merged entity.

There was an earlier attempt at a CaixaBank-Bankia merger, but it failed due to political disagreement and hierarchy issues

Bankia CEO José Sevilla had already hinted at the possibility of a merger at the most recent results presentation in July. “There is some incentive for mergers,” he said at the time. “We will see in the coming months. There is a breeding ground for mergers.”

But in a June interview with EL PAÍS, Goirigolzarri did not seem keen on the idea. “Could there be a merger? Yes, but we’re not working on that, much less amid this crisis. It’s a way to become more efficient, but there is also a management risk involved. If the merger is done poorly, it becomes a problem, as experienced right here at our own institution some years ago.”

The merger will require approval by the government, as the latter controls Bankia through the the Fund for Orderly Bank Restructuring (FROB), a state program launched in 2009 to oversee a wave of mergers among Spain’s floundering savings banks. “The FROB team is permanently analyzing the market conditions in order to protect the public interest through the stake in Bankia,” said the Ministry for Economic Affairs and Digital Transformation in a statement.

There was an earlier attempt at a CaixaBank-Bankia merger in 2012, when the banks were headed by Isidro Fainé and Rodrigo Rato respectively. The move failed due to political disagreement and hierarchy issues.

For CaixaBank, this would be the second corporate operation in three years. In 2018 it raised its majority share in BPI, and during the previous economic crisis it acquired Banco de Valencia, Caixa Girona and Banca Cívica.

CaixaBank currently has 4,460 offices and 35,600 employees, while Bankia has 2,250 offices and around 16,000 employees.

English version by Susana Urra.

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