Caixabank, Bankia approve merger to create Spain's biggest lender, sources say

CaixaBank's logo is seen on top of the company's headquarters in Barcelona, Spain, September 17, 2020. REUTERS/Albert Gea

MADRID (Reuters) - Caixabank CABK.MC and Bankia BKIA.MC on Thursday approved the terms of a proposed merger that will create Spain's biggest domestic bank with around 600 billion euros ($710 billion) in assets, two sources familiar with the matter said.

Caixabank and Bankia declined to comment.

The board meetings of both banks convened to discuss the merger on Thursday ended with an approval of the deal, one of the sources said without adding further details. The two banks are due to give a press conference on Friday to reveal the financial details of the merger.

The merger is expected to kick off another round of consolidation for Europe’s banks which are struggling to cope with record low interest rates and the economic downturn sparked by the COVID-19 pandemic. More deals are expected to follow in Spain.

Negotiating teams from both banks had agreed to the merger in principle on Tuesday night and board members needed to approve it.

The deal has been described as a merger, but it is in effect a takeover by Caixabank as it is almost three times as big as Bankia in terms of market value and almost two times as big by assets.

Caixabank is considering offering a premium of between 15% and just above 20% over Bankia’s average share price in the last three months, valuing Bankia at around 4 billion euros ($4.7 billion), a source with direct knowledge of the deal said on Monday.

Bankia shares closed little changed on Thursday at 1.4405 euros giving the lender a market value of 4.4 billion euros, while Caixabank rose slightly more than 1% to close at 2.065 euros.

Since news of the merger first emerged on Sept. 3, shares in Bankia have risen around 39%, while Caixabank has gained 14%, giving them a combined market capitalisation of 16.8 billion euros, according to Reuters calculations based on data from Refinitiv.

Reporting by Jesús Aguado; editing by Sonya Dowsett, Ingrid Melander and Marguerita Choy