The main shareholders in Spanish lenders Bankia and Caixabank have given their blessing to a merger aimed at creating Spain's biggest domestic bank, two sources with knowledge of the matter told Reuters today. 

One source said board meetings, which need to formally approve the deal, would be called "very shortly", possibly as early as tomorrow. 

The Spanish state holds a 61.8% stake in Bankia and the foundation of La Caixa holds, through its parent company Criteria, a 40% in Caixabank. 

"The deal was given white smoke late last night by its main shareholders," one of the sources said, without giving any financial details of the deal. 

Bankia, Caixabank and the Economy Ministry declined to comment. 

Banks across Europe are struggling to cope with record low interest rates and the economic downturn sparked by the Covid-19 pandemic, leading bankers to predict more tie-ups to cut costs. 

Bankia and Caixabank announced on September 3 that they were negotiating an all-in share deal merger to create a lender with around €600 billion in assets.

The deal would give the lenders a combined market capitalistion of around €16.3 billion, according to current market valuations. 

No financial details of the deal have been announced so far but on Monday a source with direct knowledge of the merger talks told Reuters that Caixabank would value Bankia at around €4 billion.

That is a premium on the average share price of the past three months but below its current value of €4.24 billion after both banks' share prices have jumped considerably since the merger talks were announced.