The merger plan has yet to be approved at the general meetings of the two companies and by competition authorities. Banks have said they expect this process to be concluded in the first quarter of 2021.
“With this transaction, we will become the first Spanish bank at a time when it is more than ever necessary to create entities of significant size, thus helping to support the needs of families and businesses, and to strengthen the soundness of the financial system” , Bankia executive chairman Jose Ignacio Goirigolzarri said in a statement.
Goirigolzarri will be the executive chairman of the new company and the current CEO of CaixaBank, Gonzalo Gortázar, will be the CEO.
European lenders have come under heavy pressure as a result of the global financial crisis and the ultra-loose monetary policy that followed. Additionally, the shock created by the coronavirus pandemic earlier this year exacerbated their problems and consolidation could be a solution to lower costs and make the business more profitable.
“The strong equity position of CaixaBank and Bankia will provide the ability to absorb restructuring costs and valuation adjustments, with the combined entity achieving a CET1 ratio of 11.6%,” the banks said in a statement.
The closely watched CET1 ratio is a measure of capital strength, introduced in the wake of the global financial crisis.