Business

CaixaBank becomes Spain's biggest bank by assets

Man in Madrid walks past wall daubed with graffiti demanding jobs
Image caption Spain's banks have suffered after the property bust led to high levels of unemployment

Spain's biggest bank in terms of assets has been created after CaixaBank bought Banca Civica for 977m euros ($1.3bn, £817m).

The government has amended laws to encourage mergers between banks, many of which collapsed following the bursting of the property bubble.

Banca Civica itself was formed by combining four troubled "cajas", or regional savings banks.

The merged bank will have 14 million customers.

CaixaBank will have 342bn euros in combined assets, deposits of 179bn euros and loans totalling 231bn euros,the bank said.

The CaixaBank deal will be completed by the third quarter and will generate cost savings and other benefits of 540m euros by 2014.

'Restructuring'

Following the merger, CaixaBank will be the market leader in the regions of Catalonia, Andalusia, Navarra, the Balearic Islands and the Canary Islands.

The Barcelona-based bank La Caixa, which has a majority stake in CaixaBank, will retain 61%.

"The merger will help to consolidate the restructuring of the Spanish banking sector, by creating a leading bank in the Spanish financial system with an extensive regional presence, which will help support the country's economic development," the bank said.

The Bank of Spain on Tuesday confirmed that the Spanish economy returned to recession.

It contracted again in the first quarter of 2012, the central bank said, after shrinking 0.3% in the three months to December.

On Friday, the government of Prime Minister Mariano Rajoy will announce its 2012 budget, which must set out how Spain will cut the public deficit to 5.3% of its output this year from 8.51% last year.

Many are unhappy with the deep austerity cuts enacted so far, and unions have called a national strike for Thursday to protest against labour reforms that make it cheaper to sack workers.

The country's jobless rate is 23%, the highest in Europe, and the Spanish economy is expected to contract by 1% this year.

But the European Commission has warned that if its government brought in further budget cuts to meet its targets, the economy would contract by more than that.

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