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CaixaBank fires up the cost-cutting machine

The ECB has been pushing consolidation in the hope that it will make European banks more efficient and sustainable, but it will require large-scale job losses in a weak economy.

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It must be delightful to announce you are in merger talks and see your own share price shoot up, even when everyone knows you will be the acquirer.

Late on Thursday, CaixaBank and Bankia disclosed they were exchanging information to assess a potential all-share merger. The boards of the two Spanish banks are said to be meeting on Sunday to discuss next steps.

In the markets, the widespread expectation is that this deal will happen and that it may signal the start of renewed banking-sector consolidation not just in Spain but around Europe.

It won’t be a merger of equals. Caixa, by far the bigger of the two, will be the dominant partner in what would become, by some distance, Spain’s largest bank. On Friday, Bankia’s share price shot up by 32% in expectation of a control premium, but CaixaBank shares also rose 15% on the news.

It helps when your chief executive is an ex-M&A banker and the acquiring bank has a strong record in merger integration.

We paid 0.5 times book value for Barclays Bank SAU, closed the deal in January and had integrated its IT systems by May
Gonzalo Gortázar, CaixaBank

Before Gonzalo Gortázar, now chief executive officer, joined CaixaBank in 2009, he had spent 16 years as an FIG investment banker at Morgan Stanley, heading the team in Europe that advised banks on rescue deals, recapitalizations and restructurings in the darkest days of the great financial crisis.


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