MADRID (Reuters) - Bankia (BKIA.MC) and mid-sized bank BMN are holding board meetings on Monday to discuss a potential merger deal that would create a new entity with total assets of around 230 billion euros, two sources with knowledge of the deal said on Monday.
“Board meetings to discuss the deal are being held this evening though the final agreement may not be reached tonight,” one of the sources with knowledge of the meetings said without providing any details.
Bankia and BMN, both controlled by the Spanish state, declined to comment.
Last week, Spanish Economy Minister Luis de Guindos said that he expected both banks to agree on a share swap for a merger deal within days or weeks, while the chairman of Bankia said he expected the transaction to be completed in the fourth quarter.
The state owns about 66 percent of listed Bankia, the fourth largest Spanish bank, and 65 percent of smaller lender BMN and plans to privatize them both before December 2019.
Bankia and BMN were given a 24-billion-euro ($25.5 billion) bailout in 2012 after losses on property loans.
Bankia’s market value was around 11.5 billion euros ($12.85 billion) based on its closing share price on Monday. BMN was valued at around 1 billion euros by an independent adviser selected earlier this year by Spain’s FROB bailout fund.
Spanish banks have already undergone huge consolidation since the country’s financial crisis, with just 13 left from 55 in 2008.
In the latest stage of this process, Banco Popular, the country’s sixth-biggest bank, was taken over Spain’s largest bank Santander (SAN.MC) in early June for the symbolic price of one euro after European authorities stepped in to prevent its collapse.
A privatization of Bankia and BMN is seen as one of the final steps in cleaning up Spain’s banking sector, which was hit when a property bubble burst forcing the government to combine several failing banks to form Bankia and BMN.
Analysts believe that the merger makes sense because each bank has a different geographic footprint, although the combined group would need to cut staff and branches as banks in Spain are struggling with ultra low interest rates and competition for lending.
Bankia, which lost more than 19 billion euros in 2012 due to its real estate holdings, has bounced back strongly since its bailout and now has one of the highest profitability ratios and strongest capital positions among Spanish banks. BMN’s profitability ratio is one of the lowest.
Reporting By Jesús Aguado; editing by Sonya Dowsett, Tomas Cobos and Jane Merriman