Banking giant Banco Santander announced on Monday it will absorb its Spanish offshoots Banesto and Banif, closing 700 branches and saving an estimated 520 million euros ($680 million) a year.
Santander, the biggest bank in the eurozone by market value, said the offshoots would be absorbed into the Santander brand, which would boast 4,000 branches under the same name in Spain.
Santander, which already owns 89.74 percent of Banesto, said it would pay the offshoot's minority shareholders with Santander stock, offering a premium of 25 percent.
"This is a good transaction for everyone," chairman Emilio Botin said in a statement, noting the premium to be paid to Banesto minority shareholders, the global network available to customers and the international opportunities opened up to staff.
"This transaction is part of the restructuring of the Spanish financial system, which involves a significant reduction in the number of competitors and the creation of larger financial institutions," the bank said.
Spain's eurozone partners agreed in June to provide up to 100 billion euros to rescue the crippled banking system, overloaded with bad loans extended during a housing bubble that popped in 2008.
Santander said its merger with Banesto and with its fully owned Banif unit would led to the closure of about 700 of the three banks' 4,664 branches.
But the group said it would lower job numbers gradually without "abrupt cuts".
The restructuring would save about 10 percent in costs, or 420 million euros in the third year, it said. Revenues were expected to rise by 100 million euros in the same timeframe.
The lower costs and higher revenues would mean pre-tax "synergies" of 520 million euros from the third year, it said.
"The merger will add value from the start, increasing earnings per share by three percent in the third year," Santander said.
Despite the cuts to the network, Santander said its share of Spain's bank branches would actually rise because of the contraction of the industry overall.
Santander expected its market share to rise from 10 percent of branches in 2008 to 13 percent in 2015. At the end of 2015, Spain would have an estimated 30,000 branches overall, it said, a decline of 35 percent.
Santander said the mergers would also provide new strengths in its relations with business, noting Banesto's expertise in the financing of small and medium-sized businesses and Banif's leadership in private banking with 36 billion euros of assets under management.