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.

(C) 2021 Electronic News Publishing, source ENP Newswire