UPDATE 3-Spain's Unicaja, Liberbank in merger conversations as more deals loom

* Unicaja and Liberbank would create Spain’s fifth biggest lender

* Boards to authorise negotiations in next days, source says

* Shares in Unicaja and Liberbank up more than 10%

* Sabadell shares up 4%, BBVA up 1.4% on merger expectations

* Kutxabank not in merger negotiations but holding informal talks (Adds comment from Kutxabank spokesman)

MADRID, Oct 5 (Reuters) - Spanish lenders Unicaja and Liberbank, which called off merger talks last year, confirmed on Monday they were in conversations about a potential tie-up to create the country’s fifth-biggest lender with over 100 billion euros ($117.38 billion) in total assets.

The deal would be a further sign of consolidation in the sector and pushed shares up at both banks and at other lenders such as Sabadell on expectations of further mergers.

A source with knowledge of the matter told Reuters that Unicaja and Liberbank could hold board meetings in coming days to formally initiate negotiations about a tie-up.

Unicaja shares rose 13%, while Liberbank’s were up 14.4%.

The two banks would have a current combined market value of around 1.96 billion euros, according to Reuters calculations based on data from Refinitiv.

Investment firm Alantra said in a research note it believed the merger would make sense, and the potential for value creation would be significant as the deal would be self-funded.

European banks are under growing pressure to join forces to deal with rising bad debts and record low interest rates as they battle the fallout from the COVID-19 pandemic.


Last month’s all-share deal between Caixabank and Bankia to create Spain’s biggest domestic lender created expectations of a new wave of mergers and acquisitions among Spanish banks, whose numbers have already fallen to 12 from 55 after the 2008 financial crisis.

Both Unicaja and Liberbank said in filings to the stock market regulator that they had made no decision so far on the outcome of the talks.

Unicaja said it regularly analyses potential M&A options and added that it had so far not hired any advisors, confirming a Saturday report from Reuters.

The source told Reuters that the lenders’ board meetings were expected to give their blessing to hire advisers and initiate due diligence.

Both Unicaja and Liberbank declined to comment about upcoming board meetings.

Unicaja, with 63 billion euros in assets, and Liberbank, with assets of 45.8 billion euros, called off merger talks in May 2019 after they failed to agree a share swap.

According to Alantra, the merger ratio today would be 60/40 in favour of Unicaja compared to 57/43 in May last year.

More flexibility from the European Central Bank regarding capital requirements could pave the way for more consolidation among banks in Europe.

Italy’s Intesa Sanpaolo bought Unione di Banche Italiane , while Spain’s Sabadell has also held informal talks about a possible tie-up, including with BBVA, sources told Reuters in September.

On Monday, elconfidencial website reported that Sabadell had approached BBVA and Kutxabank for a merger in previous weeks.

Shares in Sabadell were 4.5% up, while BBVA rose 1.6%.

Sabadell and BBVA declined to comment. Both lenders have recently said their priority is to generate value for shareholders on a standalone basis but remained open to analyse M&A opportunities.

A spokesman for Kutxabank said that the lender was not negotiating any merger alternatives with any Spanish bank but added that informal talks were taking place with basically every Spanish lender, including Sabadell.

$1 = 0.8519 euros Reporting by Jesús Aguado; Editing by Inti Landauro and Andrew Cawthorne and Kirsten Donovan