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UPDATE 2-Spain's Unicaja and Liberbank kick off formal merger negotiations

(Updates with formal launch of negotiations)

MADRID, Oct 7 (Reuters) - Spanish lenders Unicaja and Liberbank kicked off formal merger negotiations to create Spain’s fifth biggest lender, with over 100 billion euros ($117.38 billion) in total assets, after hiring advisors, Unicaja said on Wednesday.

Unicaja’s board hired Uria Menendez as legal adviser, Mediobanca as financial adviser and Price Waterhouse Coopers as the auditor to undertake due diligence.

A source with knowledge of the matter said that Liberbank’s board had hired Deutsche, Ramon y Cajal and Deloitte.

Despite calling off merger talks last year, Unicaja and Liberbank confirmed earlier this week that they were in preliminary conversations.

Mediobanca, Deutsche Bank and Liberbank declined to comment.

Both Spanish lenders had worked with the same financial advisers when merger talks derailed in May 2019 following a failure to agree on a share swap.

Banks are under pressure in Spain and around Europe to consolidate while facing rising bad loans amid the coronavirus pandemic and low interest rates.

Last month’s all-share deal between Caixabank and Bankia to create Spain’s largest domestic lender boosted expectations of a new wave of mergers and acquisitions among Spanish banks, whose numbers have already fallen to 12 from 55 after the 2008 financial crisis. (Reporting by Jesús Aguado; Editing by Andrew Cawthorne, Inti Landauro and Catherine Evans)