Spain nationalises three more savings banks

 

Spain’s official bank rescue fund has nationalised three more struggling savings banks, valuing them even lower than their directors’ worst expectations of only a few weeks ago, according to the Bank of Spain and private bankers. Miguel Angel Fernández Ordóñez, governor of the Bank of Spain, said on Friday that the Fund for Orderly Bank Restructuring or Frob was spending €4.75bn on recapitalising the banking operations of NovaCaixaGalicia (NCG), CatalunyaCaixa and Unnim. More ON THIS STORY In depth European banks Santander predicts return to big profits Global Insight Italy and Spain Spanish lenders to be seized by Madrid Spain aims for rapid sale of rescued caja The takeover of the three was expected. September 30 was the deadline for banks to find new capital to ensure that their “principal capital” – akin to tier one core capital under international banking rules – reached 10 per cent of risk-weighted assets for lenders without outside investors. Valuations were exceptionally low however, suggesting that the Frob was unimpressed with the assets of the cajas or savings banks concerned, all of which have been affected by the collapse of the Spanish property bubble since 2007. NCG’s banking business was valued at 0.12 times book value, CatalunyaCaixa’s at 0.09, and Unnim at zero, said Mr Fernández Ordóñez and Javier Aríztegui, who heads the Frob executive. That gives the Frob 93 per cent of NCG, 90 per cent of CatalunyaCaixa and 100 per cent of Unnim, they said. Unnim was assigned a nominal value of €1. “When a caja is worse, as when anything is worse, then it’s worth less,” was the blunt comment of Mr Fernández Ordóñez. By contrast, CaixaBank, the new banking arm of Barcelona-based La Caixa, was floated at 0.8 times book value, while Bankia, a merger of Caja Madrid and six other savings banks, managed 0.4 times. Spanish regulators have consistently been more optimistic about the state of the country’s banks than Spanish commercial bankers and foreign analysts, arguing that tight supervision has limited potential losses. Regulators say the Frob is investing a total of €7.55bn, with private investors having put in €5.84bn, most of it through the initial public offerings of Bankia and Banca Cívica in July. Spanish officials insist that they see no immediate need for further recapitalisation of the country’s lenders, although independent analysts say €30bn or more of extra injections may be needed to stabilise the system. “As of September 30, the process of recapitalisation is complete,” said Mr Fernández Ordóñez. In the restructuring of the Spanish banking sector, the number of cajas has been reduced from 45 to 15 through mergers. But successive interventions to rescue failing cajas – first Caja Castilla La Mancha, then CajaSur and most recently Banco Cam (formerly Caja Mediterráneo) – have weakened the case of the authorities. Soon after each rescue, published figures showed loan losses to be much worse than thought. After being seized in July, Cam reported a first-half net loss of €1.14bn and disclosed that its bad loan ratio had risen to 19 per cent of assets, compared with the officially published figure of 9.1 per cent in December. The authorities will now try to sell the cajas controlled by the state, starting with Cam, but are expected to find it difficult to find buyers unless they offer generous “asset protection schemes” to insure the new owners against loan losses.

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