Spanish Banks Mull Merger Under Continued Debt Crisis

Spanish savings banks Ibercaja, Liberbank and Caja3, are mulling a merger to strengthen their balance sheets as Spain’s debt crisis continues to sting the economy. The banks said their boards would meet on Tuesday to vote on the merger. While Caja3 is the result of a three-way merger of regional savings banks, Liberbank emerged after a four-way merger. The Spanish property crash has forced a wave of mergers upon the Spanish banking sector as it seeks to shore itself up against the bad debt mountain. Meanwhile, Investors are worried about the amount of bad loans Spanish banks could be holding and how the government can afford to keep bailing out the struggling financial sector. The Spanish government is requiring its banks to set aside an extra £24 billion to cover bad debts resulting from the collapse of its property sector. To make matters worse, Bank of Spain has predicted that the recession will continue in the second quarter of 2012.The perilous condition of the country’s finances was emphasized by the latest retail sales figures, which were also released on Tuesday by the National Statistics Institute. Spanish retail sales dropped in April, showing the biggest fall since the figures started being collected in 2003. Sales fell 9.8% last month compared with the same month in 2011. The fall was much worse than had been expected, and marked the 22nd consecutive month of declining sales. Sales had fallen by 3.8% in March. Retail sales fell 11.3% in April having dropped 4% in March. Spanish shoppers are struggling because of government austerity measures, rising taxes and Europe’s highest rate of unemployment.

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