The pooled resources of the four unlisted regional lenders will create Spain’s fifth biggest financial institution, with assets of more than €135bn (£115bn).
The merger between Caja Mediterráneo from Valencia, Cajastur from Asturias, Caja Cantabriais and Caja Extremadura is part of a larger programme of consolidation being promoted by the Spanish central bank.
But analysts have already questioned the cost-saving potential of a merger between institutions from disparate parts of the country, with little scope for branch closure or staff cuts.
The regional lenders – known as cajas de ahorros – were leveraged into the deal by the central bank, which said it would only offer aid to institutions which agreed to its tough restructuring rules.
Philip Gisdakis, a debt strategist at UniCredit, also questioned the timing of the merger. He said: “The encouraging part of the news flow is that under extreme pressure it seems that European governments have started to address their problems. The bad news for investors is that due to the reforms, markets will turn more negative before they will improve. Harsh austerity measures and a reform of the banking system in the midst of a deflating property bubble is definitely not supporting growth.”
The merger comes just days after Bank of Spain (BoS) took control of CajaSur after its planned merger with Unicaja failed.
BoS tapped the government’s Fund For Orderly Restructuring (Frob) to bolster CajaSur’s balance sheet with an initial €550m, but the bailout could reach as much as €2bn.
The move was a warning to other banks that they risk being taken over if they drag their heels over mergers.