All about our Bankia-Caixabank merger gossip

By Julia Pastor, in Madrid | The rumour about the merger of Bankia and Caixabank, the third and fourth largest Spanish financial entities based on asset volume and both with systemic risk, is not new. Speculations about the operation both in the press and in the financial world have been continuous since long before the crisis and the beginning of the financial restructuring.

“For more than 20 years there has been speculation about a merger of La Caixa and Caja Madrid (Bankia pilots this entity nowadays). It has been the recurring rumour in the market,” reported El País.

However, gossip about the merger of the two entities are back stronger than ever this week. On Wednesday, Caixabank president Isidro Fainé denied any negotiations with the Madrid-based bank:

“There is no negotiation with Bankia, nor any staff working for Bankia, nor any Bankia documents.”

But nobody seems to believe him. It was the new Minister of Economy Luis de Guindos who lit the rumour fuse again with his commitment to reforming the financial system by merging entities rather than creating a bad bank that would bring together the most toxic real estate assets. This is coupled with the favorable position that the Bank of Spain has towards the operation.

On the other hand, the Madrid City analysts do not appear to be very convinced by the idea of a merger. Banco Sabadell, for example, questions it because of

“the state funds that may be necessary (although it could receive the support of the EFSF or even the IMF).”

The financial press can’t resist what they call ‘the Operation of the Century’ and have flooded their pages with articles on the matter. El Economista says that

“the fact that there are no negotiations with Bankia does not mean that La Caixa is not interested in the operation.” The newspaper adds: “In fact Fainé has high quality information about the entity that Rodrigo Rato presides (with whom he is on excellent terms): the president of La Caixa has a man of his utmost trust on the Board of Bankia itself, Joan Llopart, who could be considered the Trojan horse of the possible merger.”

The web Capital Madrid points to this same theory.

“They may deny that there are talks going on as Isidro Fainé ratified, but this does not mean that the operation has stopped being the desired objective of at least one of the two entities. It wouldn’t be Bankia, whose president Rodrigo Rato right from the start has favoured the creation of a ‘bad bank’.”

Meanwhile, Cinco Días believes that

“the merger is very ambitious and there are too many obstacles to overcome and the advantages of it are not so evident […] Caixabank assets amount to €267,541 million, 5,192 offices and 27,339 employees. Bankia in turn has €303,190 million, 3,362 offices and 21,472 workers.  Such dimensions are far from providing the most exemplary efficiency ratios,” the paper said.

“Another obstacle that stands out is the socio-political aspect. Barcelona and Madrid look at each other suspiciously and this mistrust is reflected today in the form of the Spanish and the Catalan sentiment, sweetened and concentrated in football, of which the PP and CiU are clear examples.”

Outside Spain there are voices, though, that say this is the most viable option to balance Bankia’s battered balance.

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