Spain’s La Caixa in merger talks with Banca Civica

La Caixa, Spain’s largest savings bank, is in a process of due diligence to merge with smaller rival Banca Civica, both banks confirmed on Tuesday.

A second wave of mergers in the banking sector is under way as lenders look to raise capital levels to cover losses sustained from a decade of lending to a property and construction sector boom that turned sour from late 2007.

La Caixa and Civica said in separate notes to the stock exchange regulator that the merger operations were being studied with no agreement having been reached on the valuation of the two companies.

If a merger goes ahead, the move would follow last week’s purchase of state-rescued bank Unnim by BBVA, which made it the country’s biggest lender by assets, Reuters reported.

Spain has set banks stricter capital levels and aims to reduce the number of lenders to around 10 from more than 40 before the economic crisis.

Banca Civica, alongside Bankia and Banco Popular, is one of the Spanish banks with a heavy exposure to the country’s collapsed property sector with around €72 billion ($97 billion) of real estate loans on its books.