The Governing Councils of the major Spanish banks Caixabank and Bankia have approved the merging of the two banks. This creates the country’s largest lender, with more than 20 million customers and a capital of more than 650 billion euros.

CaixaBank takes over Bankia and its shareholders receive 0,68 shares in Caixa for each share they hold. This puts the value of Bankia at around EUR 3.8 billion. The financial institutions aim at cost savings of approximately EUR 770 million per year, and an additional annual turnover of EUR 290 million.

According to the councils, the new bank is being set up to “improve shareholders’ profitability and continue to support Spain’s economic recovery”. The shareholders of the banks have yet to approve the merger in November. The deal is then expected to be completed in the first quarter of next year.

Bankia was rescued by the government in 2012 with a rescue package of more than € 22 billion. At the time, the Financial Group suffered enormous losses due to the collapse of the Spanish real estate market. The government still owns more than 60% of the bank. After the merger, that’ll be about 16 percent.

The number of lenders in Spain has decreased by three-quarters since the financial crisis of 2008. The coronacrisis put even more pressure on the banks to go together, because they have to put aside a lot of money separately in order to absorb bad loans and cope with the crisis. Low interest rates also weigh on the performance of the financial groups, and supervisors therefore insist on merging financial groups in order to save costs.

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