DBRS Morningstar: Further Banking Consolidation in Spain: Unicaja and Liberbank to Create the 5th Largest Spanish Bank

DBRS Morningstar has released a commentary about the Liberbank/Unicaja merger. The transaction is expected to close during early Q3 2021 after receiving the relevant regulatory approval by competent authorities.

Key highlights include:

• DBRS Morningstar considers that on a very preliminary basis, the transaction will be broadly credit positive for Liberbank (rated BBB (high), Negative Trend) as the combined bank will benefit from being part of a stronger and more sizeable franchise
• The merger will create the 5th largest consolidated Spanish bank whilst Liberbank is currently the 12th
• The banks expect that the merger will lead to annual cost savings of around EUR 160 million by end-2023, which represents around 17% of the banks´ combined cost base.

“The merger plan includes significant restructuring costs which should improve the structurally weak profitability of Liberbank. Liberbank will be merging with a bank with a similar loan book profile with slightly higher capital ratios. The transaction will also provide additional impairment charges for Non-Performing Assets (NPAs). As a result, the new bank will have a lower Pro-Forma Net NPA ratio than that posted by Liberbank at end-September 2020. However we note that the full benefits of the merger are likely to take some time to accrue” said Pablo Manzano, Vice President.