A deal between two of Spain’s largest banks has been approved creating the country’s biggest bank and changing the landscape of the Spanish banking industry.
The merger between privately owned CaixaBank and state-owned Bankia was approved on Thursday by the board of directors and will see CaixaBank acquire Bankia for 4.3 billion euros in an all-share deal.
According to a press release published this Friday, under the terms of the deal, CaixaBank will offer 0.6845 of its shares for every Bankia share.
However, shareholders from both companies along with competition authorities will also need to approve the deal before it can be given the green light.
Under the terms of the new deal, CaixaBank shareholders will hold around 74.2 percent of the new bank, while Bankia shareholders would hold the remaining 25.8 percent.
The companies revealed that the new bank will retain the CaixaBank branding, will have total assets of around 664 billion euros and provide banking services to some 20 million customers.
In a statement, current Bankia Executive Chairman and Chairman of the new bank, Jose Ignacio Goirigolzarri said, “With this operation, we will become the leading Spanish bank at a time when it is more necessary than ever to create entities with a significant size, thus contributing to supporting the needs of families and companies, and to reinforcing the strength of the financial system”.
The banks have said that they expect the merger to be completed during the first quarter of 2021.
In 2012, Bankia was on the verge of collapse and requested a government bailout to the tune of 22 billion euros.
The news comes during a very difficult period for the Spanish economy which has seen record-low interest rates and increasing pressure due to the Coronavirus pandemic. In the second quarter of 2020, the country’s GDP (Gross Domestic Product) fell by a whopping 18.5 percent, the largest fall of any of the EU Member States.
It has not been disclosed how many jobs will go due to the merger, but the country’s largest trade union the CCOO believes that job losses will be inevitable with the merged bank currently having over 6,300 outlets and employing more than 51,000 people in Spain.
New CEO Gonzalo Gortázar said, "The merger will allow us to face the challenges of the next 10 years with greater scale, financial strength and profitability, resulting in greater value for our shareholders, more opportunities for our employees, better service to our clients and a greater capacity to support Spain’s economic recovery".
Analysts believe that for many of Spain’s banking institutions, consolidation could be the solution in cutting costs and making the banks more profitable in the long-term. Further mergers between some of the country’s biggest banks are a real possibility in the near future.
Image Credit: Bankia
January 14, 2021