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Goirigolzarri reiterates that the merger with BMN will boost banking business revenues and increase profitability

14 September 2017

Category: Corporate

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José Ignacio Goirigolzarri, Bankia’s chairman, during his speech at the Extraordinary General Meeting of Shareholders

  • The transaction will lead to higher revenues in both net interest income and in fees and commissions
  • Goirigolzarri said that these potential revenue synergies “are not included in the profitability calculations of the transaction”
  • The bank estimated that the Bankia and BMN merger would result in a 16% increase in earnings per share
  • The bank’s chairman highlighted that the merger comes at a time when “the Spanish economy is growing strongly” and interest rates may normalise “at some point next year”

Bankia's chairman, José Ignacio Goirigolzarri, reiterated today that the merger with BMN will enable the bank to boost banking business core revenues while growing the customer base.

During his speech at the Extraordinary General Meeting of Shareholders held in Valencia to approve the transaction, Goirigolzarri acknowledged that the merger with BMN "opens clear opportunities for us". "And this should lead to higher revenues in terms of both net interest income and fees and commissions," he said.

Bankia's chairman stressed that these potential revenue synergies "are not included in the profitability calculations of the transaction and we believe that there is a clear potential that we must exploit".

The merger with BMN opens clear opportunities for us and this should lead to higher revenues in terms of both net interest income and fees and commissions.

José Ignacio Goirigolzarri
Bankia’s chairman

Goirigolzarri reminded that cost synergies are expected to total 155 million euros over the next three years, 96% of which will be achieved in the first two years. "These synergies are crucial to generate value and to contribute to repaying taxpayers," he pointed out.

Consequently, by 2020, the transaction will result in additional profits for the bank of around 245 million euros, leading to a 16% increase in earnings per share. The return on equity will increase by 120 basis points, while the return on capital employed will total 12%.

Bankia's chairman highlighted the industrial rationale of the transaction, saying that it comes at a "highly appropriate" time, as the Spanish economy "is growing strongly, faster than the European average", with an unemployment rate that is "clearly falling".

Goirigolzarri also underlined that the transaction will be completed during a period in which interest rates are expected to start normalising at "some point next year". This could have a positive impact on the resulting bank's revenues, since the lion's share of the loan book is at floating rates.

Robust capital position

The chairman indicated that the transaction will be completed without the need to raise funds in the market, due to Bankia's robust capital position. Since 2013 the bank has been able to generate 477-basis points making Bankia " the institution that has generated the most organic capital amongst the major European banks".

The bank estimates that the fully loaded CET1 ratio will reach 12% after the merger, taking it "above the average of our competitors".

Goirigolzarri revealed that the bank's results to date "are well on the way" to achieving this target, as the bank has been able to generate 45 basis points of the highest-quality capital in the second quarter.

Bankia's chairman said that the merger's success depended on "the clear definition of principles and values", something that "this board of directors has always considered to be a top priority and will continue to do so in the future".

Goirigolzarri resolved to "continue implementing the best corporate governance practices, just as we have been doing in this merger".

In this regard, he highlighted that Bankia had strengthened its position in the Dow Jones Sustainability Index (DJSI) for the second year in a row "because it is an extremely important independent recognition that we are on the right track".

Merger to be completed in December

The bank's plan is for the deal to be completed in December, once the necessary authorisations have been obtained. At that point, the integration process of  the two banks will begin.

Bankia anticipates that this process will include integrating the institutions' systems in the second quarter of 2018: "a clear objective as it will ensure that all customers benefit from the merger as quickly as possible, and a necessary condition so that all our teams follow common practices and procedures".

Goirigolzarri emphasised that the integration will be shaped by "strict meritocracy criteria and continuous interaction and dialogue with the workers' representatives". He added that the transaction "brings huge opportunities for current Bankia and BMN staff".

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