Cost savings arising from domestic consolidation in the Spanish banking sector should be a driver for more potential deals, bank executives told a financial event in Madrid on Wednesday.
“Such deals, when done correctly, make a lot of sense and help make the business more profitable and sustainable,” Unicaja (UNI.MC) Chief Executive Manuel Menendez told the forum.
Spain now has 10 banks, down from 55 before the 2008 financial crisis, with recent deals including Caixabank’s (CABK.MC) acquisition of Bankia and Unicaja’s deal to buy Liberbank. The deals have been accompanied by promises of cost savings.
“Personally, I think there will be more (mergers), I don’t know when or who and I don’t think it will happen tomorrow,” Caixabank CEO Gonzalo Gortazar said.
Gortazar said “supervisors have been clearly endorsing publicly to pursue this path,” citing the low profitability of banks as one of the sector’s structural weaknesses.
But he said it would be more complicated to generate cost savings with cross-border transactions in Europe.
In July, Caixabank raised its annual cost savings from the Bankia deal to 940 million euros ($1.1 billion) from 770 million euros. The deal created Spain’s biggest domestic lender. .
As part of its Liberbank deal that created Spain’s fifth biggest lender, Unicaja said it aimed to save 192 million euros on gross costs by 2023.
Unicaja’s Menendez said on Wednesday the bank would deliver on those savings and added that there “is upside for additional synergies that should arise sooner rather than later.”
Caixabank has announced it would cut about 6,450 jobs to meet its cost savings. Unicaja has yet to give details about its restructuring plan.