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UPDATE 1-Spain's Caixabank and Bankia call shareholder meetings to approve takeover

(Adds statement from FROB bailout fund)

MADRID, Oct 23 (Reuters) - The boards of Spanish lenders Bankia and Caixabank will call shareholder meetings on Dec. 1 and Dec. 3 respectively to approve their agreed merger, the banks said on Friday.

Caixabank last month agreed to buy Bankia for 4.3 billion euros ($5.1 billion) in an all-share deal that creates Spain’s biggest domestic lender and signals a potential pick-up in sector consolidation as European banks battle the fallout from the COVID-19 pandemic.

Spain’s bank bailout fund FROB said the deal would increase the value of its holding in Bankia, despite reducing its stake to 16.1% from 61.8%, and would improve the prospects for recovery of state aid.

Bankia was bailed out in a 22.4 billion euro state rescue in 2012 at the height of Spain’s financial crisis but has returned only 3.3 billion euros of state aid so far.

The lenders aim to close the deal by the first quarter of 2021. ($1 = 0.8447 euros)

Reporting by Jesús Aguado Editing by David Goodman

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