During the 1980s many regulatory constraints limiting competition in Spanish banking were relaxed or removed, although deregulation came later to savings banks than to the rest of the banking sector. Two consequences of partial deregulation of savings banks have beena rapid growth in branching activity, much of it geographically dispered, and a burst of merger activity. In this paper we investigate productive efficiency, and total factor productivity change, in Spanish savings banks over the 1986-1991 deregulation period. Neither branching nor mergers provide an adequate explanation for the magnitude or the nature of the productivity decline we observe over the period.