Spanish banks in merger talks
Spanish unlisted savings bank Liberbank is in talks about a possible merger with rivals Ibercaja and Caja 3, to bulk up their capital position as they struggle with billions of euros of bad property debt.
Investors believe Spain cannot replenish a capital hole in its entire banking system without seeking an international bail-out.
Bankia, formed by an earlier tie-up between seven banks, asked the government for a record rescue of more than €19 billion on Friday, helping to push the country's risk premium against German 10-year debt above 500 basis points.
Liberbank, Ibercaja and Caja 3 together hold toxic assets, including bad loans to housing developers, of around €11.8 billion, around a quarter of that held by Bankia and its parent company Banco Financiero y de Ahorros (BFA).
The three regional banks submitted separate statements to the stock market regulator saying their boards would meet today to approve an integration. The deal would create the country's seventh-biggest entity with more than €115 billion in assets.
Talks are at a very advanced stage, a source close to the operation said.
After the integration Ibercaja would hold a 46.5 per cent stake in the new lender, while Liberbank would have 45.5 per cent and Caja 3 the remaining 8 percent, the source said.
Ibercaja and Caja 3 were already in talks to merge at a time when mid-sized banks are under enormous pressure from the government to consolidate and recognise huge losses from a housing crash.
Spanish banks have already written off €84 billion in losses against property portfolios under government demands from two bank reforms so far this year, and analysts see that rising.
Lenders have undergone a wave of consolidation which has reduced the number of cajas to less than 10 after Catalonian savings bank Unnim was bought by BBVA and Banco Civica was absorbed by Caixabank.
Banks have until June 11th to show how they will meet the new capital demands and June 30th to put forward any merger plans.