BBK and Kutxa to form third-largest savings bank

31st October 2008, Comments 0 comments

If approved, the merger will see a new bank in Spain called Caja de Ahorros y Monte de Piedad de Euskadi.

31 October 2008

MADRID - Two Basque savings banks on Thursday announced that they have agreed to combine their businesses in what could kick off a wave of consolidation in the Spanish banking sector.

Bilbao Bizkaia Kutxa (BBK) and Caja de Ahorros y Monte de Piedad de Gipuzkoa y San Sebastián (Kutxa) said they would dissolve themselves and pool their assets and management in a new bank to be called Caja de Ahorros y Monte de Piedad de Euskadi.

They also left the door open for the third savings bank in the Basque Country, Vital, to join the tie-up.

The merger is subject to the approval of the bank's governing bodies, whose members represent a broad section of the local community, including political parties and labour unions.

BBK, Kutxa and Vital shelved plans to merge in 2005 in the face of opposition from local politicians. However, the global credit crunch has heightened the rationale behind tie-ups among Spain's 45 regional savings banks.

The combination of the two lenders will form the third-largest savings bank in Spain in terms of earnings and net worth. It would have pro forma profits of EUR 523 million and a net worth of EUR 7.434 billion.

The two banks own stakes in a number of large companies, including 7.2 percent of Iberdrola, Spain's second-biggest electricity supplier. The merged lender will have 753 branches and 5,284 employees. The merger could generate costs savings of around 15 percent.

The governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, said Thursday that tie-ups among banks are one way for them to strengthen their operations.

"The economies of scale afforded by consolidation processes among banks [...] is one of the ways of rationalizing costs structures," the governor said.

The country's banks, Fernández Ordóñez added, are looking at falling earnings and need to cut costs.

"The Spanish banking sector faces significant challenges ahead, which will impact their ability to generate earnings over the coming quarters," he said.

[El Pais / Adrian Soto / Expatica]

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