⁍ Caixabank CABK.MC and Bankia BKIA.MC are set to approve a deal that will create Spain’s biggest domestic lender.

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⁍ The proposed merger marks another round of consolidation for Europe’s banks.

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⁍ The Caixabank/Bankia tie-up is expected to lead to hefty cuts in jobs and branches.

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– Spain’s Bankia and Caixabank have agreed in principle to a merger that will create the country’s biggest lender by market value, sources tell Reuters. The all-share deal will result in a bank with a combined market value of $18.96 billion, and board members are due to sign off on the financial terms tomorrow. “The deal was given white smoke late last night by its main shareholders,” one source says. Caixabank will hold 77% and Bankia 23%, respectively, at the time of the merger talks, Reuters notes; at current prices, the split would be closer to 74% for Caixabank and 26% for Bankia. The proposed merger marks another round of consolidation for Europe’s banks, which are struggling to cope with record low interest rates and the economic downturn sparked by the COVID-19 pandemic. More deals are expected to follow in Spain. Teaming up with rivals offers banks a chance to generate value and cut costs to help offset an expected increase in non-performing loans. The Caixabank/Bankia tie-up is expected to lead to hefty cuts in jobs and branches. Caixabank and Bankia would leapfrog Santander and BBVA BBVA.MC in the Spanish market with a combined market share of around 30%, according to analysts. Both Santander and BBVA would remain bigger globally, but not in Spain. The Spanish state holds a 61.8% stake in Bankia and the foundation of La Caixa holds a 40% stake.