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Caixa and Bankia are studying their possible merger to increase their profitability in the face of Covid

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CaixaBank and Bankia study to undertake a process of fusion in order to increase its profitability in the face of the crisis caused by the Covid-19 pandemic. Both entities have confirmed it this Thursday, touching midnight, in separate statements sent to the National Securities Market Commission (CNMV).

The information had been advanced by various means, and finally both CaixaBank how Bankia have reported the start of negotiations. The entity chaired by Jordi Gual has opened the process "after authorization from its board of directors". As he explains, the process continues its course, and for the moment no agreement has been reached in this regard, beyond the signing of a confidentiality agreement to exchange information to assess the operation, within a 'due diligence', counting on advisers for the operation ".

Is about Hey, who will be in charge of assessing the accounts. "CaixaBank will inform the market of the result of said negotiation at the appropriate time," concludes the relevant event. Bankia, for its part, says that it has started talks with the Catalan bank "within the framework of the usual study of possible strategic operations". It has confirmed the contacts with Caixabank, "with the knowledge and authorization of the Board of Directors, to analyze a possible merger operation opportunity between the two entities".

Like the other, the entity chaired by José Ignacio Goirigolzarri explains that given the "preliminary nature" of the operation, "it is stated that a proposal to initiate study and analysis has been submitted to Bankia's governing bodies that allows the Board of Administration to adopt the founded decision that corresponds, counting for it with the pertinent advisers ".

Bankia has had many 'boyfriends' over the last few months, and BBVA was one of those that had sounded louder, but it seems that it could finally be CaixaBank who will take the cat to the water.

The merger of CaixaBank and Bankia, the third and fourth largest entity in the Spanish financial sector, would give rise to a group with assets worth 650,000 million euros, some 6,600 branches (4,400 the entity of Catalan origin and more than 2,200 the nationalized entity) and a joint workforce of more than 51,000 employees (almost 35,600 CaixaBank and some 16,000 Bankia), which would promote significant synergies, it reflects Europa Press.

According to the plans put on the table, La Caixa Foundation would control 30% of the group resulting from the merger, while the Fund for Orderly Bank Restructuring (FROB), would lower its weight from almost 62% today to 14%. Industry sources have explained that the operation would have the approval of the Government, although sources from the Ministry of Economy and Digital Transformation have not wanted to comment on the matter.

RESPONSE TO THE ECB'S CALL

In this way, CaixaBank and Bankia respond to the call made insistently by the European Central Bank (ECB) of accelerate the consolidation process of the sector, the last time this week by the mouth of his vice president, Luis de Guindos, during his intervention in the courses of the Menéndez y Pelayo University (UIMP) of Santander. De Guindos emphasized the difference between the low profitability of Spanish entities (between 2% and 3% in some cases) and the cost of capital (generally higher than 10%).

With the eventual merger of CaixaBank and Bankia, both entities they would resume the attempt they made in 2012 when Isidro Fainé and Rodrigo Rato failed to carry out an attempt that was frustrated at the time due to political issues and discrepancies in the command hierarchy.

Regarding the organization chart of the resulting entity, it is considered that it may be chaired by José Ignacio Goirigolzarri, current Chairman of Bankia, as non-executive chairman and with Gonzalo Gortázar, CEO of CaixaBank, as plenipotentiary CEO.

The operation would also allow the Government recover part of the aid received in the rescue of Bankia, which exceed 24,000 million euros, of which to date it has recovered only about 3,000 million through two partial sale processes and via dividends.

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