Bankia and Caixabank Merge to Form the Largest Spanish Financial Institution

The boards of directors of both institutes gave the go-ahead for the merger, as Bankia and Caixabank announced in a joint statement on Friday. “The merger will enable us to meet the challenges of the next ten years with greater financial strength and profitability,” said Caixabank boss Gonzalo Gortázar, who will head the merged institute in the future. Industry experts believe that this is the start of further consolidation in the industry.

The new institute will be run under the name Caixabank and will serve more than 20 million customers in Spain in the future. This makes it the largest domestic financial institution with 6300 branches and more than 50,000 employees. However, rivals Santander and BBVA are bigger on their own because of their extensive overseas operations.
It is not yet clear how many jobs will be eliminated. Talks with the unions are due to start soon. Over the next three years, the houses promise savings of around 770 million euros annually. Together they come to a market value of almost 17 billion euros.

The number of banks in Spain has fallen sharply since the financial crisis. Provisions for impending loan defaults as a result of the Corona crisis and the persistently low interest rates are increasing the pressure for further mergers. The rating agency Fitch expects the merger of Bankia and Caixabank to significantly increase competition in the private customer business and in mortgage lending. This could force smaller institutions in particular to merge with competitors in order to take advantage of economies of scale.

Bankia and Caixabank had only made their negotiations public a few weeks ago. The transaction will be carried out entirely through shares. The state-owned Bankia is valued at 4.3 billion euros. Bankia had to be saved from collapse in the Spanish real estate crisis with billions in aid from the state. This last held 62 percent. The government has a 16.1 percent stake in the merged institute. In November, the shareholders of both banks are to approve the deal at general meetings, and the antitrust authorities have yet to approve. The transaction is scheduled to be completed in early 2021.

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