Date Published: 20/10/2020
ARCHIVED - Bankia-CaixaBank merger to take effect early in 2021
ARCHIVED ARTICLE
Customers are unlikely to notice the effects of the change until late next year
Gonzalo Gortázar, the managing director of CaixaBank, announced on Monday that the merger of the bank with the Valencia-based Bankia will take effect during the first quarter of 2021.
Prior to the merger going ahead the audit and consultancy firm BDO is to deliver its report on the operation this week and then the relevant shareholders’ meetings have to be called and held, and Sr Gortázar explained that teams from both banks are currently working on the outstanding details related to legal issues and to the procedure of integrating the two companies’ systems. This integration will be completed in the final quarter of next year and is a complex operation which requires a good deal of preparation, but he added that both CaixaBank and Bankia are fortunate enough to have been involved in similar operations in the past.
In real terms, what this means is that account holders with the two banks will not notice the effects of the merger until the end of 2021, again according to Sr Gortázar, who reiterated that the upshot of the merger will be increased efficiency and improvement in the level of personal banking offered to customers.
The Spanish Government is the majority shareholder in Bankia, with 61.8% of the capital, having merged together seven bankrupt banks during the last economic crisis in 2012, injecting more than 22,000 million euros to prop it up. The Sareb (commonly called the bad bank) sprang from this same operation, property assets hived off and sold/managed over the last 8 years to try and reclaim as much capital as possible from the housing, land and property portfolios seized by the bands due to loan defaults when the property bubble burst, a process which began in 2008, but intensified in 2010 and lasted until 2013.
The initial brief of the Sareb envisaged disposal of the assets within 2 years, but 8 years later, there is still a substantial bank of assets and the Spanish Government has been waiting for a chance to withdraw from Bankia, but has been unable to do so due to the ongoing fallout from the economic crisis and the length of time it has taken for the country to emerge from recession, the State unable to withdraw from Bankia, due to a persistent low level in its value.
So far, it has only recovered 3.3 billion euros from the initial injection.
CaixaBank, is Spain’s third largest institution, with nearly 10.9 billion euros in capitalization and 400 billion euros in bank assets, and Bankia, its fourth largest bank, with nearly 3.2 billion in capitalization and over 200 billion in assets.
Both banks have lost a significant part of their value since the Covid crisis began and published falling profits, but analysts believe that a merger is a mutually beneficial proposition, and both banks are well-aligned to offer advantages to the other.CaixaBank, since the last financial crisis, has been one of the most active entities in the absorption of entities. It was acquired Banca Cívica, Morgan Stanley in Spain, and Banco de Valencia and Barclays. Bankia also has experience in this field, since it joined with BMN a few years ago, a group that was also nationalized.
As a result of the pandemic, the situation in the sector has become more clouded if that is possible, due to the inevitable financial burden as unemployment rises and the economy teeters.
Bankia has reduced its stock market value to less than 3,200 million, so that the participation of 62% of the Frob barely stands at 2 billion. For its part, CaixaBank has reduced its capitalization to 11,900 million.
The operation will allow the State to participate in a group with a greater potential for profitability and thus be able, through a subsequent sale, to recover some of the public aid originally injected.
The new group will be able to carry out high cost synergies, since it would be created with more than 50,000 employees and 6,700 offices, of which 6,000 are located in Spain. The rest are in Portugal, where CaixaBank has a presence through BPI. The greatest network duplications occur in the Valencian Community, where both have their headquarters.