MADRID (Reuters) - Spanish savings bank Liberbank said it would merge with rivals Ibercaja and Caja 3, bulking up the banks’ capital positions as they struggle with billions of euros of bad property debt.
The merger would give Ibercaja 46.5 percent of the resulting group, Liberbank 45.5 percent, and Caja 3 8 percent, and create the country’s seventh-biggest entity with more than 115 billion euros ($144 billion) in assets.
The merger of the three unlisted banks must be cleared by competition authorities.
Investors believe Spain cannot replenish a capital hole in its 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 euros 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 real estate assets, including bad loans to housing developers, of around 11.8 billion euros. That is about a quarter of the total held by Bankia and its parent company Banco Financiero y de Ahorros (BFA).
Ibercaja and Caja 3 were already in talks to merge. Mid-sized banks are under enormous pressure from the government to consolidate and recognize huge losses from a housing crash.
Spanish banks have been asked to make provisions of 84 billion euros this year under two reforms, and analysts see that figure rising.
Lenders have undergone a wave of consolidation that has reduced the number of cajas, or savings banks, to less than 10 after Catalonian savings bank Unnim was bought by BBVA and Banco Civica was absorbed by Caixabank.
Banks have until June 11 to show how they will meet the new capital demands and have until June 30 to put forward any merger plans.
Consultancies Oliver Wyman and Roland Berger are carrying out an external audit of banks’ balance sheets, which is expected to drive further consolidation.
One of the main incentives to merge is that banks are given two years instead of one to meet capital demands.
Reporting by Jesus Aguado; Editing by Sonya Dowsett, Erica Billingham and John Wallace