MADRID, Sept 10 (Reuters) – Spain’s Sabadell has been holding exploratory talks over the summer with BBVA and Santander about a potential tie-up without entering so far into formal negotiations, four sources told Reuters, as the number of Spanish banks is expected to shrink by around half amid the coronavirus pandemic.

All-in share talks between Caixabank and Bankia announced last week create expectations of a new wave of consolidation among Spanish banks, whose numbers already shrank from 55 to 12 after the 2008 financial crisis.

Sabadell has been widely tipped to become one of the next lenders to be involved in a deal, with its shares up around 18% since the Caixa-Bankia deal was announced last week.

Sources with knowledge of the matter told Reuters that Sabadell had been holding informal talks with several lenders in recent months regarding a potential tie-up, with two sources saying there had been contacts with Spain’s second-biggest bank BBVA and two others mentioning Santander.

“Negotiations have not been initiated with anyone but contacts have been taking place, including with BBVA and Santander,” a banking source with knowledge of the matter said, without giving more details on what the contacts entailed, beyond saying they have been going on and off over the summer.

BBVA is seen by bankers as the most likely to be interested in a deal, given Santander bought Spain’s Popular Bank in 2017 and is largely focused on growth in emerging markets.

Sabadell, BBVA and Santander declined to comment. (Reporting by Jesús Aguado Editing by Ingrid Melander and Rachel Armstrong)

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