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Friday, January 15, 1999 Published at 22:42 GMT


Business: The Company File

Euro bank mega merger

Santander's Emilio Gotin and BCH's Jose Maria Amusategui celebrate the merger

Spain's Santander and Banco Central Hispano (BCH) have announced a $30bn merger, creating the largest banking group in the eurozone of countries that have joined Europe's single currency.

The new group will be called Banco Santancer Central Hispanoamericano. The merger is to come into force in three or four months. In terms of market capitalisation it will be Europe's largest bank and its eighth largest by assets.


[ image: The merger has given a boost to Spanish banking shares]
The merger has given a boost to Spanish banking shares
Santander is already Spain's largest bank. Joining up with third-placed BCH is expected to boost profits by 25% during the next two years and could provide cost savings of 100bn pesetas.

BCH chairman Jose Maria Amusategui called the merger "an equitable agreement among equals".

The consolidation of Spain's banking sector is a direct response to the introduction of Europe's single currency. The euro has brought more competition and falling profit margins.

Analysts expect banks across the euro zone to merge as they try to create economies of scale and improve their performance.

Juan Berberana, analyst at brokerage AB Asesores in Madrid, said the new banking group would have the muscle to compete in Europe.

"In Europe, BCH and Santander, apart from just gaining weight specifially ... will have a very solid network of alliances", said Jose Ramon Contreras of Ahorro Corporacion Financiera.

In response the shares of other Spanish banks posted sharp gains on the expectation of more mergers.



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