DBRS Morningstar: CaixaBank & Bankia Potential Merger Could Ease the Impact of COVID-19

DBRS Morningstar has published a commentary that focuses on the implications of the potential merger between CaixaBank SA (CaixaBank) and Bankia SA (Bankia).

Key highlights from DBRS Morningstar’s commentary on the potential merger:

• DBRS Morningstar considers that on a very preliminary basis, the transaction would be broadly credit positive for CaixaBank as it would further strengthen CaixaBank´s already strong position in Spain. In addition, DBRS Morningstar anticipates Bankia’s ratings would be aligned with CaixaBank.
• The New Entity would have a 26.7% market share (in terms of gross loans in Spain), creating a large gap between the leader and next market players.
• The New Entity would have a more balanced lending book and potentially have more flexibility to cope with additional COVID-19 loan loss provisions.
• Supervisors would be expected to support the transaction, but higher capital requirements would be likely.
• The transaction would be positive from a profitability perspective. generating significant synergies through cost-cutting and economies of scale.

“DBRS Morningstar considers that the potential merger could ease the impact of the COVID-19 crisis. We expect that both banks will have to book further loan loss provisions due to the large economic shock coming from the COVID-19 crisis. The merger would provide more flexibility and resources to cope with this difficult and still very uncertain scenario”, said Pablo Manzano, Vice President from the DBRS Morningstar Financial Institutions team.