By Jesús Aguado and Emma Pinedo

MADRID (Reuters) – Cost savings arising from domestic consolidation in the Spanish banking sector should be a driver for more potential deals, bank executives told a financial event in Madrid on Wednesday.

European banks find themselves under increasing pressure to lower costs because of low interest rates and the COVID-19 impact.

Manuel Menendez, Unicaja’s Chief Executive, stated that such deals can make sense and make the company more sustainable and profitable if done right.

Spain has now 10 banks, compared to 55 prior the 2008 financial crisis. Recent deals include Caixabank’s purchase of Bankia, and Unicaja buying Liberbank. There have been promises of cost reductions with the deals.

Gonzalo Gortazar, CEO of Caixabank said that he personally believes there will be more mergers. He didn’t say when or whom and he doesn’t believe it will happen soon.

Gortazar claimed that supervisors had been publicly urging the bank sector to follow this course, citing its low profitability and other structural flaws.

He said that it was more difficult to save money with cross-border European transactions.

Caixabank grew its annual cost savings as a result of the Bankia transaction to 940 million euro ($1.1 billion), from 770million. The deal created Spain’s biggest domestic lender..

As part of its Liberbank deal that created Spain’s fifth biggest lender, Unicaja said it aimed to save 192 million euros on gross costs by 2023.

Menendez, Unicaja’s chief executive officer, stated Wednesday that the bank will deliver those savings. He also said that “there is upside for other synergies which should arise sooner than later.”

Caixabank announced that it will cut 6,450 jobs in order to achieve cost savings. Unicaja is yet to provide details on its restructuring plans.

($1 = 1.1714 euros)