CaixaBank-Bankia union will create country's biggest bank with more than 20 million customers and a 24% market share in deposits, 25% in loans and 29% in long-term savings products.

CaixaBank and Bankia have announced the largest merger in Spanish banking history, an all-share operation that makes the new group the biggest lender in the domestic market, with more than €676bn ($792bn) in assets.

The last round of mega consolidations took place in 1999, when Banco Bilbao Vizcaya acquired Argentaria to become BBVA and Santander teamed up with Hispano Central Americano. In both cases, the assets of the new banks were less than half those of the entity that is to trade under the CaixaBank corporate name. The deal is being billed as a merger, but is, in effect, widely seen as a takeover by CaixaBank, which is almost three times as big as Bankia in market value, with more than twice the assets. The agreement consists of an exchange ratio of 0.6845 new CaixaBank ordinary shares for every Bankia share and includes a 20% premium over the exchange ratio at the close of trading on September 3, 2020.

Spain banks chart

“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,” said José Ignacio Goirigolzarri, Bankia’s chairman, in a statement. 

Mr Goirigolzarri and Gonzalo Gortázar, currently CaixaBank’s CEO, will retain their respective titles in the merged group. Mr Goirigolzarri said he was “reasonably comfortable” the deal would be given anti-trust clearance. The deal needs to get the green light from the Spanish Economy Ministry, the Bank of Spain, the European Central Bank (ECB) and Spain’s National Competition Commission. Once these hurdles have been cleared, both banks have said they expect the operation to be completed by the end of March 2021.

Smooth sailing

It seems unlikely the operation will run into trouble with the ECB. The central bank has been pushing for more consolidation to boost the low levels of profitability that have plagued the European banking sector since the 2008 financial crisis. In July 2020, the ECB said it would lower the hurdle for bank mergers in the eurozone. This includes not automatically imposing higher capital requirements and allowing banks to use their own accounting models to calculate capital needs.

“Bankia had been in the spotlight of any consolidation process in Spain for some time, as its main shareholder, the Spanish government, is committed to divest its stake,” says Cristina Torrella, senior director of financial institutions at Fitch Spain. “However, this does not necessarily mean the bank could not have remained an independent entity. Bankia has gone through a successful restructuring over the past few years, improving its efficiency metrics and accelerating its asset-quality clean-up. The bank has also embarked on a more dynamic commercial strategy to diversify and increase its revenue generation capacity, which was weaker than those of its closest competitors. The pandemic came into the picture and would probably have challenged the execution of this business growth and commercial strategy, similarly to other less diversified banks.”

At the stroke of a pen, the new CaixaBank will find itself at the top of the Spanish ranking, with more than 20 million customers and a 24% market share in deposits, 25% in loans and 29% in long-term savings products. Bankia was created in 2010 from the merger of seven local savings banks. Just two years later, it was bailed out in a €22.4bn state rescue, in the darkest days of Spain’s financial crisis. That was when the Spanish government acquired a 61.8% stake in the group. This holding will be reduced to 14% once the merger is finalised. For its part, La Caixa Foundation holds, through its parent company Criteria, a 40% stake in CaixaBank. No decision has yet been announced on the fate of the new bank’s 51,500 employees and more than 7000 branches, though substantial cuts are expected on both fronts.

Aside from scale considerations, CaixaBank already benefits from a diversified business model, particularly in long-term savings, such as insurance and asset management, where it has strong market shares that, despite ongoing pressures, provide some earnings stability. From a franchise and business perspective, the combined entity strengthens its national footprint and provides Bankia with the commercial strength of CaixaBank to boost cross-selling opportunities and revenues. Ultimately this should translate into the combined group’s greater capacity to generate revenues in a more normalised operating environment. Bankia had lagged behind peers in the fee-based business despite notable improvements in the past few years.


The operation, though generally viewed favourably by the market, is not without its downsides. “Both banks have been successful in executing on their announced cost-reduction measures and have achieved significant efficiency gains in the recent past, but at 57%, the pro forma cost-to-income ratio of the combined entity compares poorly with the 50.1% average for the Spanish banking system,” says María Cabanyes, senior vice-president at Moody’s Investor Service. “This, together with poor revenue prospects amid the coronavirus outbreak, calls for more ambitious cost-cutting targets.”

At end June 2020, CaixaBank had already reviewed its costs guidance for the year, expecting expenditures to decline by at least 2% versus previous guidance of an estimated 1% growth for the whole of 2020. The bank also revisited its 2021 guidance on the back of stricter wage containment, higher-than-expected headcount reduction and general cost control, targeting additional cost savings of €300m. Bankia reduced operating costs by around 2% in the first half of 2020 and had also revised down its operating costs guidance for 2020 to 2%, from a previously expected growth of 2% for same period, fuelled by savings associated with the closure of 140 branches in the second half of 2020.

Ms Cabanyes says both banks enter this transaction with solid regulatory capital ratio levels, well in excess of minimum requirements and management targets. CaixaBank’s fully loaded CET1 ratio, or capital as a percentage of risk-weighted assets, stood at 12.29% at end June 2020, 419 basis points above its ECB supervisory review and evaluation process requirement. Bankia’s CET1 ratio stood at 13.27%, 594 basis points above its requirement. “Dependent on the terms of the deal, regulatory capital ratios could be negatively affected at a time when downside risks stemming from the coronavirus-induced economic downturn could result in higher-than-anticipated credit losses,” she says.

Mr Gortázar acknowledges the difficulties the merged entity faces in achieving revenue synergies, but he expresses confidence that the drivers are different today than in previous cases. “The CEO also left open the potential for greater cost synergies extraction beyond the current estimate of 42% of Bankia’s cost base; however, that would also result in higher provisions weighing on the bank’s capital,” says Michael Christodoulou, analyst at German investment bank Berenberg.

CaixaBank emerged on the Spanish banking scene as a major domestic player in 2011, after trading for more than a century as a Barcelona-headquartered savings bank. No sooner than it had established its presence in the Spanish retail banking market, it embarked on the merger and acquisition path to diversify its business by acquiring more than half a dozen domestic competitors, including Barclays’s Spanish business and Morgan Stanley’s private banking operations in Spain.

“The need for consolidation is not new,” says Fitch’s Ms Torrella. “For several years, the profitability of Spanish banks has been under pressure from low interest rates, subdued credit demand, increased regulatory costs and the need to invest in digitalisation. Some recent consolidation attempts have failed, such as a proposed merger between Unicaja and Liberbank in 2019, while a few small deals are at an advanced stage, including Spanish bank Abanca’s agreement with Crédit Agricole to acquire Bankoa.”

Ms Torrella believes the merger of CaixaBank and Bankia could spark a new wave of consolidation in the Spanish banking sector, as it could revive moves by other banks to gain scale, or strengthen their franchises or business models to remain competitive. “The deal will widen the gulf between Spain’s largest banks and the rest of the market,” she says. “This will significantly change Spain’s banking landscape, with important implications for other banks’ competitive positions. CaixaBank is Spain’s largest domestic bank and the merger with Bankia will considerably increase the gap with the two main competitors, Santander and BBVA, in terms of domestic scale and market share in certain regions and business segments, including mortgage lending.”

There is broad market consensus that the merger will afford an opportunity for the new bank to achieve greater economies of scale and scope. The loan exposure of the two banks is complementary, as 58% of Bankia’s loans are mortgages, while 45% of CaixaBank’s are to corporate customers. The deal “will allow CaixaBank to face the challenges of the next 10 years with greater scale, financial strength and profitability,” Mr Gortázar said. “[This] will result 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.

“We have the customer base, we have the distribution channels and the range of products to make this a success. Our insurance and pensions businesses provide us with a diversity of products that can be adapted to our customers’ needs. Our synergies and cost savings amount to more than €1bn a year, so we are looking at creating significant levels of value.”


All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker

For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Top 1000 2023

Request a demonstration to The Banker Database

Join our community

The Banker on Twitter