Spain greenlights merger of Bankia and Banco Mare Nostrum

The bank bailout fund says fusion best way to recover cash pumped into failed lenders

Madrid 15 MAR 2017 - 08:22 ART

Spain’s Orderly Bank Restructuring Fund (FROB) on Wednesday gave the go-ahead for a merger between failed banks Bankia and Banco Mare Nostrum (BMN), informing the National Securities Market Commission (CNMV) that the fusion of the two lenders was the best way to ensure the recovery of cash used to rescue them.

Spain’s Bankia is 65% government-owned. EFe

The FROB – set up in 2009 to rescue Spain’s failing banks – believes a fusion of the two lenders is a better option than selling them off individually, estimating the merger would bring in €401 million more than two separate sales. That profit calculation is, however, subject to market conditions and to the future prospects of the two banks.

The bailout fund pumped €22.4 billion into Bankia in 2012 while BMN received a cash injection of €1.64 billion in 2013.

The bailout fund pumped €22.4bn into Bankia in 2012 while BMN received a cash injection of €1.64bn in 2013

The Spanish government holds a 65% stake in both lenders.

Before settling on the merger option, the FROB attempted to sell BMN but the single offer received fell short of expectations. With the maximum value of that offer being €1.3 billion, the fund stated it would have only received €690 million.

For its part, Bankia – formed by the merger of seven struggling saving banks in the wake of the collapse of Spain’s real estate market – has told the CNMV that once it has received further details from the FROB it will carry out an independent analysis of the operation. The bank also stressed that no decision has yet been taken and that no agreements or proposals are currently in place regarding the proposed merger.

Any such fusion would also need to be approved by the management boards of the two lenders and by shareholders

Any such fusion would also need to be approved by the management boards of the two lenders and by shareholders.

The cost to Spanish taxpayers of restructuring the country’s banking sector since 2009 has been €51.3 billion, of which just 5%, or €2.7 billion, has been recovered so far, according to a report released by the Bank of Spain last September.

The central bank also admitted that €26.3 billion in state aid to the country’s banks will never be clawed back, despite promising voters in 2012 that they would not foot the bill for the financial crisis.

English version by George Mills.