Banking in Spain: from fifty entities to a dozen in 15 years

The intention of BBVA taking over Sabadell puts the focus once again on the concentration of the banking sector in Spain, which experienced a sharp reduction in entities due to the disappearance of savings banks due to the financial crisis 2008 and was cut again after the recent integration operations of Caixabank with Bankia and Unicaja with Liberbank.

Before the financial crisis led to the disappearance of the savings bank system (regional public banking), there were around fifty entities in Spain, some of them with a limited geographical scope and a reduced level of business. Fifteen years later there are a dozen entities left and they could end up with nine.

Currently, Banco Santander, BBVA – these two with a strong presence in Latin America -, Caixabank, Sabadell, Unicaja and Bankinter are the largest in a sector where some names such as Abanca, Kutxabank, Cajamar and Ibercaja have also remained.

The merger of Caixabank and Bankia in September 2020, which was formalized in March of the following year, was the last of great significance, creating a banking giant that today leads the sector in Spain.

Added to this was the union between Unicaja and Liberbank, which ended with the integration of two medium-sized entities into one larger one. The operation ended in July 2021.

If the public takeover bid (takeover bid) addressed to Sabadell shareholders and announced this Thursday by BBVA were successful, they would constitute the second national bank in Spain and the third in Europe. On Monday, Sabadell’s management already rejected a friendly merger agreement proposed by BBVA.

Due to the financial crisis, in a scenario of minimal or even negative interest rates, banks returned to mergers with the aim of achieving the size necessary to improve their business.

In fact, regulators encouraged these unions, even urging supranational integrations, which did not occur, to improve profitability.

The sector had already seen the number of entities reduced in 2017, when Santander bought Banco Popular for the symbolic price of one euro, after it suffered a “significant deterioration”, according to the European Central Bank, due to the loss in value of the real estate assets it owned.

The fall of savings banks

The fall of Caja regional de Castilla La Mancha, which was intervened by the Bank of Spain, was the trigger that burst a system of small entities that had had excessive exposure to the construction business in Spain, the well-known ‘housing bubble”.

The outbreak destroyed the financial system of the savings banks and left behind bulging financial holes of billions of euros lost and cases of corruption of managers.

In 2009 the ‘dance’ of the so-called ‘cold fusions’ between these entities or in larger banks. From one of these integrations arose the seed, for example, of Bankia, which united up to seven savings banks, the most notable of which was Caja Madrid.

Although some private banks, such as Bankinter, have maintained their path alone in recent years, most have in their history the integration of one of these savings banks.

BBVA, for example, incorporated the Catalan companies that were included in Unimm or Catalunya Caixa, which came from the union of other smaller entities.

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