Shareholders approve the birth of the new CaixaBank, the largest bank in Spain

The CEO of CaixaBank, Gonzalo Gortázar, during the CaixaBank shareholders' meeting to give the green light to the merger project with Bankia BIEL ALINO / EFE

The CaixaBank shareholders meeting today approved the merger by absorption of Bankia, which has taken a definitive step towards the creation of the largest bank in Spain and the first to emerge after the pandemic and the economic crisis that It has generated.

Spain has been a pioneer in Europe in the merger of large entities since the arrival of covid-19, following the indications of both Spanish and European supervisors.

"Today's meeting is historic", defended in this sense the president of CaixaBank, Jordi Gual, in a speech in which he highlighted that, despite being the 85th integration in the history of the entity born from La Caixa, the current operation is "one of the great milestones in the history of the entity."

A majority of shareholders present at the meeting directly or electronically (representing 70.3% of the capital) have validated the operation and the appointments of the new board of directors.

99.2% of the capital represented at the Bankia meeting also validated its absorption on Tuesday.

In the words of its top leaders, José Ignacio Goirigolzarri, president of Bankia and of the future entity (last Tuesday), and today Gonzalo Gortázar, CEO of the old and new CaixaBank, the bank was born with the promise of being not only the biggest, but also “the best”, which anticipates strong competition in the sector in Europe.

After approval by the boards, the merger project must be approved by the Bank of Spain, the European Central Bank, the National Commission for Markets and Competition and finally by the Ministry of Economic Affairs.

The managers estimate that the new entity will be a reality in March 2021, although the technological integration of both platforms will not arrive until the end of next year.

The size of the new leader is the product of the integration of 18 savings banks, almost half of those that existed, and reflect the financial debacle experienced in Spain between 2008 and 2012. The new CaixaBank will have a total asset volume of more than 660,000 million euros and market shares of around 25% in Spain, serving more than 20 million customers.

With 51,500 employees, the physical network of Bankia and CaixaBank has a presence in more than 2,200 municipalities in Spain, in 290 of which it will be the only bank present.

The bank will maintain its headquarters in Valencia, where the two entities already were, and its operational headquarters in Madrid and Barcelona.

The shareholders' meetings of the two banks have approved the exchange ratio of the transaction in 0.6845 new ordinary shares of CaixaBank for each Bankia share, with a premium of 20%.

In this way, CaixaBank shareholders will represent 74.2% of the capital of the new entity and those of Bankia, 25.8%.

The State has endorsed the merger and will go from having 62% of Bankia to 16% of the new group, where it will be represented by a director.

Taxpayers contributed some 24,000 million to Bankia (counting what was injected into BMN, which was absorbed).

At current prices, this participation has a market value of about 2,240 million, which reflects the great distance with the money contributed.

The first shareholder will be the La Caixa Foundation, chaired by Isidro Fainé, who will control 30% of the bank, will have two directors and will propose the majority of the independent directors.

Reasons for the merger

The reason why it was decided to sell Bankia to CaixaBank, according to Goirigolzarri's arguments on Tuesday and also defended by Gual today, was to verify that negative interest rates would continue in this situation until 2027, according to experts, which it did almost impossible to obtain the expected profitability to increase the value of the entity and return part of the taxpayers' money.

Furthermore, solvency, which increases with integrations for accounting reasons, has become a decisive factor in entities.

This economic crisis has made cost savings a priority to offset the drop in income caused by negative rates, which also stimulates mergers.

And the acceleration factor in trying to lower costs has been the increase in the digitization of customers after confinement, which has allowed banks to automate processes and work with fewer open offices.

Precisely the reduction of branches and personnel will be one of the first challenges that CaixaBank will have to face in 2021. The unions have starred in the shareholders' meetings demanding that the dismissals be agreed, through early retirement, and that they are not forced.

In the market there is speculation with the departure of some 8,000 of the 51,500 workers of the new group, 15% of the total.

The entity has continued today without specifying what the final impact will be.

“A new CaixaBank must be better”, defended Ruth Bolaños today, who has intervened on behalf of a group of employees and shareholders of the entity on behalf of CC OO.

He has demanded that "working conditions, employment and social responsibility" be guaranteed.

Catalina Llibre, general secretary of UGT at CaixaBank, has referred in the same line, who has defended minimizing the impact of the cuts and for those dismissals that are not avoidable has demanded "decent" conditions.

"We have not received any information about the path that you are going to take," said Llibre, in a complaint shared with the rest of the union representatives who participated in the Caixabank meeting.

The unions consider that mass layoffs and branch closures, both in this bank and in others, can accelerate the financial exclusion of the elderly, due to the digitalization imposed, and that of the inhabitants of rural areas, and reduce the quality of the service.

Gortázar has defended during the aftershocks that gaining the strength that the merger will entail will allow having enough muscle to ensure a banking presence in areas with low population density.

The trade union organizations also recall that, before the arrival of European aid, it will be the banks that distribute part of it and, for this work, the knowledge that the employees of their clients have is needed.

The heads of Bankia and CaixaBank have assured in the meetings that their will is to reach agreements with the workers' representatives.

But, while they will have to find a good economic solution for the workforce, the leaders of the new bank have placed special emphasis on profitability, since the new group expects more than 1,000 million euros in synergies;

aspires to generate 290 million annually by means of higher income and save 770 million from 2023. This is one of the dilemmas that will have to be resolved, because the financial markets throughout Europe will be very attentive to this operation.

The promises to analysts, which they must now fulfill, have been ambitious;

In terms of earnings per share, the resulting entity will reach a level of 0.33 cents per share in 2022, 28% more than what CaixaBank would obtain independently and almost 70% higher than that of Bankia.

In terms of return on tangible capital or ROTE, the group may reach 8.2%, much higher than that which they would achieve separately, which will allow the distribution of higher cash dividends.

The merger project, Bankia and CaixaBank point out, represents the birth of a new entity "with a large critical size, with a high quality of balance sheet, very solvent, a unique distribution model and which, together with the synergies that are to produce after integration, it will be able to generate higher profitability ”.

The time to prove it is near.