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(Bloomberg opinion) – Faced with a mountain of bad debts caused by a pandemic, two of Spain’s largest banks need to merge to cushion the coup, an intelligent and preventive technique and a control situation for regulators who want to inspire consolidation.The banking monetary industry in Europe wants to pay attention to this.
Investors are right to inspire the news. The shares of CaixaBank SA and Bankia SA, advertising lenders targeting the domestic market, rose after announcing that they were holding initial talks for a capital agreement.Shareholders have moved away from European lenders since the start of the pandemic, fearing that for years they will struggle to repair profitability after governments close emergency funding taps and their loans deteriorate.
CaixaBank’s acquisition of small national lender Bankia would probably not be the transformative cross-border merger that would reshape European industry, but would create Spain’s largest bank through assets, loans and deposits, beating Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA.
To have a handful of strong and diversified national lenders in the midst of the worst economic contraction in human memory will be Spain.Basically, this mixture has the prospect of particularly reducing overcaly capacity in the country’s banking sector.
The merger of the two corporations will create a bank with a balance sheet of 665 billion euros ($790 billion) and offer the opportunity to reduce office duplication.CaixaBank, founded in Barcelona, and Bankia have a giant presence in locations such as Valencia and Madrid.Up to 23% of its branch networks overlap, according to analysts at Barclays Plc.Assuming they simply cut off a portion of the staff in closed branches, analysts expect banks to save around 500 million euros a year, expanding the merger.the group’s source of tax revenue up to 18% until 2022.
The merger would also be CaixaBank’s largest portfolio of customer and business loans by absorbing a bank more exposed to the credit market.
However, the mixture is perfect. CaixaBank benefits from a higher percentage of asset control and insurance income, more pandemic-proof than Bankia’s increased credit dependence.Negative interest rates go up to this disadvantage.
Moreover, assuming an agreement is reached, governance can be complicated: Spain still owns 62% of Bankia after saving the bank in 2012, and would still have up to 17% of the new group, with a prospective acquisition premium of 30%.This would also leave Criteria, CaixaBank’s largest shareholder, with up to 31%.
And it is not known how expensive the transaction will be for investors.Barclays analysts estimate that the merger could lose up to 8.7 billion euros from the so-called negative trading fund, the difference between the value paid for the assets and the cost of the informed e-book.- That would help pay for the merger. The amount of negative trading fund that banks will have, and if regulators will allow it, will be essential to cut shareholder participation.
As the acquisition of a smaller competitor in Italy by intesa Sanpaolo SpA this year demonstrated, there are tactics for assuming an inflated cargo base.Right now, it’s to tell you how painful the economic recession will be.Game.
This column necessarily reflects the perspectives of the editorial board or Bloomberg LP and its owners.
Elisa Martinuzzi is Bloomberg’s finance opinion columnist and former european finance editor-in-chief at Bloomberg News.
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