Fitch Ratings on April 7 placed Banco Mare Nostrum SA's BB/B long- and short-term issuer default and senior unsecured debt ratings on Rating Watch Positive.
Fitch also affirmed the bank's "bb" viability rating and its 5 support rating.
The ratings actions came after Spain's bank restructuring fund, known as FROB, said BMN's merger with Bankia SA should optimize the recovery of state aid given to both banks.
The Rating Watch Positive on BMN's issuer default and debt ratings is based on the agency's view that there is a high probability that the merger will go ahead, given that the FROB is the controlling shareholder of both the banks. Fitch expects to resolve the watch once the merger is completed, which Fitch expects in the second half.
BMN's ratings reflect the bank's moderate capital buffers, improving but still weak asset quality and low core profitability. The ratings also take into account the bank's sound regional franchise and adequate funding and liquidity.