Merger Between Spanish Banking Groups BBVA And Bankia Is The Most Cost Effective Integration

As the European Central Bank (ECB) this week encouraged mergers between banking groups within the eurozone, a Barclays report has identified which bank mergers would be more or less costly to carry out.

The European Central Bank (ECB) has taken a further step to encourage bank mergers within the eurozone by eliminating the conditions for generating capital between banking groups. Until now, the regulator required that the resulting banking group retain the higher capital of the two involved in the merger. This meant that expansions were usually required that tended to alienate shareholders as well as other accounting obligations that made the mergers less attractive, some of which have now been removed.

In line with the move by the central bank led by Christine Lagarde, the Barclays investment bank has produced a report comparing the advantages and disadvantages of four possible mergers that could be carried out in the Spanish market: Caixabank-Bankia, BBVA-Sabadell, BBVA-Bankia, and Bankia-Sabadell.

According to Barclays’ calculations, a future BBVA-Bankia would have integration costs of 2.529 billion euros, making it the ‘cheapest’ merger due to the fact that it would need fewer additional provisions -774 million-, it would also contribute less in deferred tax assets -1.089 million- and would have fewer branch and staff restructuring costs -666 million, just below the Bankia-Sabadell option.

With the changes brought about by the ECB, Barclays believes that mergers could be encouraged after the summer. However, the banks have stated that for the moment, unions between banking groups were still far away.