José Sevilla: “The merger with CaixaBank represents the creation of a stronger entity amidst an uncertain environment”

Bankia's CEO, José Sevilla, stated that the merger with CaixaBank is an operation that will enable the two entities to 'act realistically in an uncertain environment' and create a 'stronger and better prepared' entity. 'Both parties stand behind this operation with great conviction', he underlined.

During his participation in the 11th Financial Meeting by Expansión and KPMG, Sevilla indicated that before the merger takes place, both banks will be required to convene their respective extraordinary shareholders' meetings, as well as obtaining the pertinent regulatory authorisations, which means that the operation will be concluded in the first quarter of 2021.

Although he acknowledged that he has always believed in Bankia's capability to be an independent project, which was reflected in the 2018-2020 Strategic Plan, the entity's CEO pointed out that 'the world has changed radically in recent months', with a climate of interest rates in negative for longer than expected and immersed in a pandemic whose final effects are yet unknown.

'The answer to this economic difficulty, which will have an impact on defaults and the income statement, is a merger, which is the best way to improve profitability in this context and to be better positioned to deal with the situation', he underlined.

The merger, which is the best way to improve profitability in this context and to be better positioned to deal with the situation.

José Sevilla
Bankia's CEO

Sevilla recalled that in this operation each partner contributes one thing, with Bankia offering excess capital in the amount of 2.5 billion euros at the end of the year, an objective contemplated in its 2018-2020 Strategic Plan.

'We thought that the best way to use them for the shareholders was to put them to good use in an operation like this. The fact that in the exchange equation there is a 20% premium for Bankia shareholders is to a certain extent a reflection of the situation of excess capital from which we depart', he said.

However, he assured that until the merger takes place, both entities will continue to operate as independent banks, hence they will continue to compete until the integration takes place. 'We are strongly focused on recording good figures at year-end and this means competing with CaixaBank and the rest of the market players', he added.

Downturn of financial perspectives

Bankia's CEO of Bankia has pointed out that on a macroeconomic level the current stagnation of economic activity will affect the Spanish economy in 2020 and 2021, a fact that must lead us to 'be more responsible'. In this regard, he believes that Spain 'has an important opportunity in Europe's recovery plan', whose funds in his opinion should be invested in a manner that will help mitigate the short-term effects of the crisis, transform the productive model of the Spanish economy in the medium-term and generate more jobs for the future.

Sevilla explained that the current evolution of the economy will cause the financial system as a whole to increase its default ratio, although he warned that it is complicated to make predictions about the figures of such an increase, since there are mitigating elements whose effect is not yet known, such as the ERTE (temporary employment reduction) or support for businesses through the ICO guarantee.

At this point, he recalled that the stimuli to the economy will be gradually withdrawn and he urged to reflect on the solvency of companies to be able to separate those that will be viable in the future from those that will not. For this reason, he insisted on the need to improve the bankruptcy law in order to provide a quick way out for non-viable companies and to help the viable ones find ways to support themselves through their own resources, adding public-private efforts.