Spain's central bank kicked off the sale of Caja de Ahorros del Mediterráneo a day after the bailed-out lender disclosed huge losses and triggered new fears about the health of the country's ailing savings banks.

Spain's central bank kicked off the sale of Caja de Ahorros del Mediterráneo a day after the bailed-out lender disclosed huge losses and triggered new fears about the health of the country's ailing savings banks.

The Bank of Spain's adviser in the sale, Bank of America Merrill Lynch, is distributing sales documents to potential bidders, asking them to present nonbinding offers by the end of the month, according to people familiar with the situation.

However, the response has been lukewarm so far, they said.

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CAM's bad loans soared to 19% of total lending at the end of June, after its new central bank administrators reviewed the loan book, doubling the 8.5% past-due loan ratio disclosed by CAM in March. Above, a woman walks in front of a CAM branch in Madrid in July.

The central bank hopes to wrap up the sales process by the end of October, the people said.

Spain faces a mammoth task in finding a buyer for CAM, which has €71 billion ($100.10 billion) in assets, rising bad loans and dwindling deposits. It came under government control in July. Preliminary results, published Monday, showed its balance sheet had deteriorated much more than previously thought; it lost €1.14 billion in the first six months.

A Bank of Spain spokesman declined to comment. Bank of America officials weren't immediately available to comment.

CAM's woes add to pressure on the Bank of Spain's efforts to clean up a banking system that continues to grapple with the collapse three years ago of a decade-long housing boom. CAM, Spain's 10th-biggest bank by assets with an extensive branch network, was a big lender along Spain's Mediterranean coast, where bankrupt developers have left thousands of half-finished apartment buildings and plots of land with their lenders.

The bank's bad loans soared to 19% of total lending at the end of June, after its new central bank administrators reviewed the loan book, doubling the 8.5% past-due loan ratio disclosed by CAM in March.

"We were expecting the revised numbers to be bad and that the new administrators would recognize new loan losses, but these numbers are very scary," said Maria Lopez, a banking analyst with Espirito Santo Investment in Madrid.

CAM's size, as well as its problems, means only the largest Spanish financial-services companies have the capital and access to financing under current market conditions, bankers say.

One potential buyer is CaixaBank SA, the Barcelona-based lender with the biggest branch network in Spain. It has hired U.S. investment bank J.P. Morgan Chase to advise on a potential bid, according to people familiar with the matter, although an offer is far from certain, one of those people cautioned. A spokesman for J.P. Morgan Chase in Madrid declined to comment.

CaixaBank has higher capital ratios than its larger and more internationally focused rivals Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, two other candidates to take over CAM.

However, bankers say that both Santander and BBVA would likely have to issue new shares to raise the funds needed to clean up CAM, a move that would be dilutive to existing shareholders and could spook jittery investors.

Santander and BBVA officials declined to comment.

Some foreign lenders, including Barclays PLC and BNP Paribas SA have looked at CAM in the past, but it is unclear if they will join the upcoming auction. Barclays and BNP Paribas officials declined to comment.

Several private-equity firms have also asked for a look at CAM's books. But bankers say they believe buyout firms won't be able to offer as high a price because they can't realize the same cost savings that banks could achieve by combining operations.

Eight lenders went through CAM's books before it was seized by the central bank in July, but all balked as authorities were initially unwilling to provide protection against potential loan losses.

In earlier auctions of seized banks, the Bank of Spain has offered loan-loss protection to bidders, and this program is likely to be repeated with CAM, people familiar with the matter said.

Spain injected €2.8 billion into the Alicante-based lender this summer. Before the central bank takeover this summer, CAM was in advanced talks to merge with three smaller peers. But the would-be partners became increasingly concerned about CAM's solvency and pulled out of the merger plan.

Worries about the health of Spain's banks are pushing up borrowing costs for Spain's government. The yield premium over 10-year German bonds, the euro-zone benchmark, has hit record levels in recent weeks as investors fret about the European Union's faltering efforts to strengthen support mechanisms for financially frail countries.

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