Santander, Spain’s largest bank by assets, has announced it is to absorb its subsidiaries Banesto and Banif through a merger.
The merger will result in the closure of around 700 outlets, part of an ongoing trend among major Spanish banks to shrink their branch network.
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Santander said that the reduction in total employment stemming from the branch closures will be implemented gradually, without abrupt cuts.
According to the bank this will be achieved by transfers to other units of the Group, in Spain as well as a broad, natural turnover and incentivized departures.
Santander has not specified how many jobs are to be slashed as a result of the merger.
Santander’s chairman, Emilio Botín, said: "This is a good transaction for everyone. For the shareholders of Santander and Banesto, who will receive a premium of 25% and shares with the most attractive dividend in the market; for customers of Banesto, who will have access to the Group’s 14,000 branches around the world; and for employees, who will be able to have international careers. Santander is the strongest, most solid bank in Spain."
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By GlobalDataThe merger brings the total of branches operated by Santander in Spain to 4,664, 500 branches less than Spanish lender La Caxia.
Banesto, which is 88% owned by Santander, is currently the fifth largest banking group in Spain operating around 1,770 branches.
Santander has predicted that the merger will save it 520m ($684m) per year in three years’ time.
According to Santander the move will have a neutral effect on Santander’s capital ratios.
Banesto shareholders will receive Santander shares at a premium of 24.9%.
The merger is expected be completed in May 2013 with the operational and brand integration completed later in the year.
The absorption of Banif, a 100%-owned unit of the Santander Group, will reinforce Santander’s specialised private banking network in Spain. Banif has 36bn of assets and 550 employees in 52 branches.
The group’s combined market share of branches in Spain will increase from 10% in 2008 to 13% in 2015, as the expected reduction in branches is considerably less than the decline in the sector as a whole, said Santander.
The announcement of the deal is a u-turn on Santander’s previous position that the group would not be buying the rest of the Banesto stake.
In April chief executive Alfredo Sáenz said the money that Santander stands to gain from the merger might not be enough to make it worthwhile.
At the end of 2015, Spain will have an estimated 30,000 bank branches, a reduction of 35% (or 16,000) since 2007.
This transaction is part of the consolidation of the Spanish financial system, involving a significant reduction in the number of competitors and the creation of larger financial institutions.
