The merger last month of Spain's largest and third-largest banking groups, the Banco de Santander and Banco Central Hispano, came as a "complete surprise" to many and could well have pointed the path for other banks within the euro-zone to look for suitable partners.
Since both banks have important interests in the now volatile markers of Latin American it is the timing of the merger, and not its operation which surprised financial analysts.
They have long advised that mergers were necessary if Spanish banks wanted to take their place in the first division of European banking.
Mr Emilio Botn, chairman of Banco Santander, toasted the alliance with his new partners. He said he believed that the only way to go forward in the new Europe was by consolidating. "If we want to come out in the family photos, one has to move around. And this is what we have done." The #31 billion (£24 billion) fusion of the two banks is the first major deal since the new single currency came into operation on 4th January, and has created a bank to take its place amongst Europe's top 10 banks.
For the Banco Santander, which last February bought Banesto, Spain's biggest retail bank, it marks the culmination of a hectic 12 months. The combined group, which took the name Banco Santander Central Hispano-Americano, mercifully abbreviated to BSCH, is expected to control almost 20 per cent of Spain's bank loans and around 22 per cent of its investment funds.
It will have total of 6,455 branches within Spain and another 2,226 abroad, mainly in the two banks' Latin American subsidiaries, and a combined workforce of 106,500 employees, many of whom fear their jobs are in danger.
Spain is notorious for being the European country with the highest concentration of bank branches, and it seems likely that in the long or medium term several of the BSCH branches will have to close. In the rest of Europe one expects to take a bus or car to one's nearest bank, but in Madrid one is likely to be able to choose between half a dozen within a few hundred yards. "There are more banks in Madrid than there are tapas bars," says Madrid computer operator, Mrs Isabel Flores.
BSCH will operate with joint chairmen, Mr Emilio Botn of Santander and Mr Jos Mara Amustegui of Central Hispano, until 2002, when the latter will retire on reaching the age of 70, leaving Mr Botn in sole control.
Both men have tried to reassure workers that the job losses will be minimal, although the newly appointed BSCH managing director Mr Angel Corcstegui, admitted that their would be a certain amount of "vegetative cut backs and early retirement" of staff. Bank directors are to meet with union officials within the next few weeks to see how a mutually acceptable compromise can be reached.
Financial observers are now busy looking to see where the next changes will occur and which other banks will find suitable bedfellows.
Banco Bilbao Vizcaya (BBV), Argentaria and Banco Popular are all seen as potentially eligible candidates in the merger market, although Popular have ruled themselves out in the short term, saying they prefer to remain independent.
On Monday BBV issued its annual report, with the news that net profits were up by over 25 per cent over 1997. BBV chairman Mr Emilio Ybarra, admitted that a "marriage" could not be ruled out. He said that he would not be pressured into a hasty union in the light of the Santander-BCH decison nor would he give any hint as to where he was looking. "Size is important in Europe today," he said while adding he was in no hurry. "There are still many brides around in both Spain and Europe."
