DBRS Morningstar: CaixaBank & Bankia Merger to Create the Leading Banking Franchise in Spain

DBRS Morningstar has released a commentary about the CaixaBank/Bankia merger by absorption, which was approved on the 3rd of December 2020. The transaction is expected to close during Q1 2021 after receiving the relevant regulatory approval by competent authorities, including market competition authorities.

Key highlights include:

• DBRS Morningstar sees the transaction broadly credit positive, but there are challenges including execution risk and the still developing impact from COVID-19.
• DBRS Morningstar considers that the merger will create a powerful franchise in Spain, with a leading market share of 26.7% of gross loans in Spain. This will clearly position the Bank as the market leader.
• DBRS Morningstar also takes into account challenges stemming from the merger. We note the large size of the transaction and the execution risks, in particular regarding IT migration.
• When the merger closes, DBRS Morningstar expects to have a clearer picture of the likely extent of the negative impact of the COVID-19 crisis on Bankia and CaixaBank´s asset quality and profitability.

“DBRS Morningstar considers the transaction will be broadly credit positive for CaixaBank as it will further strengthen its already solid position in Spain. In particular, if the merger goes ahead, DBRS Morningstar anticipates a positive impact over the short to medium-term on CaixaBank's franchise, and earnings. Nevertheless, we still note the ongoing negative implications of the COVID-19 crisis on CaixaBank´s creditworthiness” said Pablo Manzano, Vice President.