CEO José SevillaÁlvarez said Spain's FROB bank restructuring fund and the European Commissionare in preliminary talks regarding a potential merger between the lender andBanco Mare NostrumSA.

Sevilla said on a first-quarter earnings conference callthat Bankia would study any merger proposal, Reuters reported, noting that thebank is subject to M&A restrictions until June 2017.

FROB owns a 65.03% stake in Banco Mare Nostrum, according toS&P Global Market Intelligence data, while FROB-owned has a 64.69% shareholding in Bankia. The Spanish government has pledged to exitBankia by 2017-end, Reuters noted.

Bankia was formed out of seven Spanish cajas, or savings banks, while Banco MareNostrum is the product of a four-caja merger.