MADRID, Oct 13 (Reuters) - Three Spanish savings banks from the northern region of Catalonia are likely to apply for government funds to complete a planned merger, a source close to the talks said on Tuesday.
Caixa Catalunya, Caixa Manresa and Caixa Tarragona will ratify the merger plans during board meetings on Tuesday and then apply to the Fund for Ordered Bank Restructuring (FROB), the source said.
"It's logical to think that yes, the merged group will apply for help from the FROB, but nothing has been finalised," the source said.
Spokesmen from the three savings banks would only confirm their boards planned to draw up a road map to a merger when they met on Tuesday. A spokeswoman from the largest of the three banks, Caixa Catalunya, said it was too early to say if they would apply to the FROB for aid.
The Bank of Spain declined to comment.
Local governments in several Spanish regions and the Bank of Spain have been actively encouraging savings banks to accelerate merger talks in order to strealine operations hard hit by the collapse of the property market.
The planned tie-up between Caixa Catalunya, Caixa Tarragona and Caixa Manresa, which would create Spain's fifth largest savings bank, is one of two projects in the works in Catalonia.
All three banks reported tumbling net profits and deteriorating credit quality in the first quarter of 2009.
In June, the Spanish government created the FROB, which is worth 9 billion euros ($13.3 billion) and may borrow up to 10 times that to prevent solvency problems in smaller banks.
While Spain's 46 regionally-focused, mostly unlisted savings banks have been hit by their exposure to a burst housing bubble and declining credit quality, no bank has drawn on the FROB.
The three Catalonian savings banks will ask the government for 1.5 billion euros to complete the merger, local news agency EFE said on Monday. (Reporting by Jesus Aguado; Writing by Paul Day; Editing by Dan Lalor) ($1 = 0.6746 euro)