Goirigolzarri: “The new entity aspires to be the best bank in Spain for our customers, our people and our shareholders”

• Bankia chairman José Ignacio Goirigolzarri has highlighted that the anticipation involved in carrying out this transaction 'has been a key strategic factor' because, 'at a time of abrupt change, anticipation gives you a broader range of options and allows you to take on the integration from a stronger financial position'
• The proposed merger means the birth of a new bank 'with a large critical mass, a high-quality business sheet, highly solvent, with a singular distribution model and which, together with the synergies that will arise after the integration, will be able to generate stronger earnings', he explained
• To achieve success in this merger, 'we will count on the experience and enthusiasm of two great teams' and the common culture of both banks
• The exchange ratio of 0.6845 CaixaBank shares for each Bankia share represents a premium of 20% over the trading price the day the merger was announced, or of 28% compared with the average trading price for the three previous months
• In terms of earnings per share, the combined entity will attain 0.33 cents per share, nearly 70% higher than what Bankia would have obtained otherwise
• Goirigolzarri recalled that 'we start out with very comfortable capital levels that will allow us to absorb the restructuring costs and financial adjustments, estimated at 150 basis points, to give us pro forma top-tier capital of 11.6% in March 2021'
• The merged bank will have total assets of more than 660,000 million euros and market shares of close to 25% in Spain, and deliver high-value services to over 20 million customers
• The Bankia and CaixaBank physical branch networks operate in more than 2,200 towns and cities in Spain, in 290 of which where we will be the only bank with a presence, bearing out our clear commitment to be close to our surrounding communities and intensify our promotion of financial inclusiveness.

Bankia chairman José Ignacio Goirigolzarri noted that the merger with CaixaBank is a major milestone for the banking system, as it will create the top financial franchise in the country, one that aspires to become 'the best bank in Spain for our customers, our people and our shareholders'.

During his talk to the Extraordinary General Meeting of Shareholders held in Valencia, Goirigolzarri explained that 'we have always been mindful of the challenges before us in terms of strategy and profitability', and now those challenges 'have been greatly intensified as a result of the economic and social crisis spawned by Covid-19'.

In this regard, the Bankia chairman highlighted that the anticipation involved in carrying out this transaction 'has been a key strategic factor' because, 'at a time of abrupt change, anticipation gives you a broader range of options and allows you to take on the integration from a stronger financial position'.

Goirigolzarri told the shareholders how the Board of Directors saw the need for that anticipation to materialise in the search for a partner with the aim of ensuring 'a sufficient critical mass to obtain economies of scale, enhance efficiency and wield greater capacity for sustained investment in technology and innovation'.

A new entity with greater financial robustness and sustainable profitability

In addition, teaming up with that partner will allow 'greater robustness, with a strongly provisioned and well capitalised balance sheet to be able to face the consequences of the economic crisis from a stronger position'. A further aim of the integration is to achieve sustainable profitability and have 'a balanced business mix and strong capacity to generate revenue from diversified sources'.

Bankia's chairman added that it was critical to find those traits in a partner, but just as important was to find a common culture and shared values to mitigate the implementation risk that all mergers entail.

For Goirigolzarri, 'the proposed merger that we are presenting here today meets all those objectives and we will be accompanied by the best travel partner that we could have for starting out on this new stage: CaixaBank'.

We will be accompanied by the best travel partner that we could have for starting out on this new stage: CaixaBank

José Ignacio Goirigolzarri
Bankia chairman

The proposed merger means the birth of a new bank 'with large critical mass, a high-quality business sheet, highly solvent, with a singular distribution model and which, together with the synergies that will arise after the integration, will be able to generate stronger earnings', he explained.

'The purpose of the Bankia-CaixaBank merger is not just to form the biggest bank in Spain; we aspire to be the best bank in Spain for our customers, our people and our shareholders. A bank, what is more, that will be recognised for its contribution to society', Goirigolzarri insisted, while also noting that to do this 'we will count on the experience and enthusiasm of two great teams' and the common culture of both banks.

According to the plans drawn up by the two banks, 'it is not just a matter of summing up what we have, but of creating a franchise that enhances the practices that are today pursued by each of the banks separately. And we must do this based on principles which, given our origin, are shared and that must be strengthened even further going forward'.

Major synergies and shareholder value

The Bankia chairman recalled the important synergies allowed by the merger with CaixaBank, with the new group aiming to increase its revenues by 290 million per year, before tax, by implementing the best commercial practices of the two banks.

The new bank also projects annual cost savings of around 770 million euros, before tax. This will notably lift the new entity's profitability as measured both by earnings per share and by return on capital.

In terms of earnings per share, the combined entity expects to obtain 0.33 cents per share in 2022, some 28% higher than what CaixaBank would have achieved on its own and nearly 70% higher in the case of Bankia.

The offered swap ratio of 0.6845 CaixaBank shares for each Bankia share implies a premium with respect to Bankia's share price on the day the merger was announced of 20%, or of 28% compared to the average trading price for the three months before the announcement, the most commonly used indicator.

The combined bank's return on tangible equity (RoTE) could reach 8.2%, far higher than what the two banks would achieve on their own. In this way, the Bankia chairman assured shareholders that 'this improvement in returns will allow us to pay out larger cash dividends in the future'.

Strong solvency and liquidity position

The merged bank will have total assets of more than 660,000 million euros and market shares of close to 25% in Spain, and deliver high-value services to over 20 million customers.

Thus, after the transaction has been approved, the new CaixaBank will be the out-and-out leader in Spain in market share, both in loans and in deposits, in line with the situation seen in the sector in other European countries, where the market leader holds similar shares.

In relation to the quality of its assets, the new bank is born with a strong balance sheet, as seen in its NPL ratio, the lowest of Spain's banking majors, combined with one of the highest NPL coverage ratios.

At the same time, Goirigolzarri pointed out, 'we are starting out with very comfortable capital levels that will allow us to absorb the restructuring costs and financial adjustments, estimated at 150 basis points, to give us pro forma top-tier capital of 11.6% in March 2021', with a capital buffer, after the adjustments and the integration, of more than 310 basis points over the regulatory requirement.

Together with the high quality of its assets and deep capital adequacy, the Bankia chairman underscored that we will start out with a strong liquidity position, with 128,000 million euros in liquid assets, 'placing us in a superb position to continue lending to businesses and households'.

The union of the two banks also gives rise to a major differential value, namely, the creation of a distribution platform that is singular in both scope and diversification and with the clear intention of offering the broadest range of high-value products and services to customers.

In this respect, Bankia and CaixaBank's physical branch networks operate in more than 2,200 towns and cities in Spain, in 290 of which where it will be the only bank with a presence, bearing out the new bank's clear commitment to be close to its surrounding communities and to intensify its promotion of financial inclusiveness.

Excellent corporate governance

Bankia's chairman also referred to the 'excellent' corporate governance of the new merged entity, with a Board of Directors one-third composed of directors from Bankia and two-thirds named by CaixaBank.

'I think we should feel proud to have a Board of Directors composed of individuals of recognised prestige, with vast experience and unquestionable commitment', he assured.

Independent directors will make up 60% of the Board and 40% of the directors will be woman. By category, the 15 directorships on the new Board will consist of three proprietary directors: two representing Criteria and one for the FROB.

And the new bank, with the CaixaBank name, will remain headquartered in Valencia and have two operating head offices: one in Barcelona and another in Madrid.

As for the calendar and upcoming key steps in the merger, after the approval by the shareholders of Bankia and CaixaBank, which holds its general meeting on Thursday, December 3rd, the banks will move forward in the process of applying for the requisite approvals, including authorisation from Spain's Ministry of Economic Affairs and Digital Transformation, which in turn requires a prior report from, amongst other bodies, the Bank of Spain and the European Central Bank, as well as Spain's antitrust authority.

Once those clearances are received, the necessary arrangements will be made to execute the legal merger and carry out the merger share swap and hence the admission to trading of the newly issued CaixaBank shares, which will have the same financial, voting and other rights as those currently in circulation.

The process is expected to be carried out over the course of the first quarter of next year. The process of integrating the two banks will then begin and culminate with the technological integration, which is initially projected for late 2021.

Milestones in the transformation of Bankia

The chairman of Bankia reviewed the major milestones in the bank's history since the new management team was installed in 2012. Goirigolzarri recalled that in the first stage, which spanned the first three years until the end of 2015, 'the main objective we set for ourselves at that time was to make Bankia a viable and sustainable project'.

'To do this we had to comply with the Restructuring Plan that Brussels imposed on us in exchange for the aid received. This enormous effort was overseen by a radical change in our corporate governance, aimed at guiding the pursuit of our first Strategic Plan', he pointed out, and went on to underscore that the objectives charted were achieved and 'the requirements of the Restructuring Plan were fulfilled two years ahead of time'.

The bank thus entered a new stage in 2016 in which, 'after carrying out a profound strategic analysis, we changed our commercial positioning to place the customer and his or her needs and demands front and centre in our all decisionmaking'.

'We as a bank drew closer to our clientele, offering simpler products and services, without the fine print, and easier to understand', Bankia's chairman underlined, and added that 'as soon as we were able to convey this new positioning to our customers, the perceived quality of service rose notably and with it our ability to attract new customers'.

According to Goirigolzarri, 'with this new commercial momentum, we entered a third stage, that has covered the last two years, and which for our bank has been a time of growth and transformation'. This stage has been marked by two major challenges: the challenge of profitability and a technological challenge generated by changing customer habits in how they interact with the bank in times of digital disruption.

Bankia's chairman explained that these challenges have been tackled via non-organic growth, notably highlighted by the integration of BMN; and through a 'huge push toward both digital and cultural transformation'.

On the one hand, that digital transformation has led the organisation to adapt its multichannel distribution model to the new needs of the clientele; and, on the other, a cultural transformation in which Bankia has evolved 'towards a more open, less hierarchical and more flexible organisation, with large degrees of autonomy and a strong commitment to talent and a culture of meritocracy'.

According to Goirigolzarri, 'thanks to all that work in these years, and despite a very adverse environment, Bankia will close 2020 having generated more than 2,500 million euros in surplus de capital in the three years of the 2018-2020 Strategic Plan, bringing the net NPA ratio to below 3% and achieving extraordinary gains in market shares in the corporates segment and across all high-value products'.

Professionals: 'Driver of the change'

The head of the bank mentioned the 'driving force behind the enormous change' that Bankia has undergone in recent years, stressing his conviction that 'the most important factor has been the transformation of our team's mindset'.

'That is what has brought us here and what allows us to take on this new project with satisfaction and self-confidence. I am grateful to the Bankia team for many reasons, but above all for their example, the example they have given me during all these years', he continued.

The integration's success will depend on the commitment and effort of that team, the executive asserted, emphasising that 'we are joining forces with another formidable team of professionals who have succeeded in creating a magnificent franchise', a team with which we share the goal of contributing to the development of Spanish businesses and households and supporting our country's recovery, and of spearheading the process of transforming the Spanish banking system, which, in the end, is the goal of this merger', Goirigolzarri concluded.