Number of 'cajas' will seek state funds, says Unnim

Unnim, an amalgam of three Catalan savings bank, believes that a number of Spanish lenders will seek state funding to meet the new solvency requirements for the sector due to the problems in the current environment of raising private capital.

The minimum core capital ratio is being raised from 6 percent to 8 percent, and to 10 percent in the case of non-listed savings banks, known as cajas, which are heavily reliant on wholesale funding. Banks can tap the Orderly Banking Restructuring Fund (FROB) to do so in a process that would involve de facto partial privatization.

"At first sight the FROB sounds bad, but if you look at it again (...) in the current environment, and with such low valuations it is normal (to ask for help)," Unnim's non-executive chairman, Jaume Ribera, told a seminar on Monday. "In an economic context such as Spain's, it would be extraordinary for all institutions to raise the capital they need, and therefore, the FROB will have to take stakes in quite a few," he added.

The Bank of Spain estimates that the sector will need a total of 15.15 billion euros to meet the new capital requirements, including 14.077 billion euros. Unlisted Unnim needs 568 million euros to reach the 10-percent level. Banks that receive funding from the FROB have the right to buy back stakes taken by the state fund at market prices within a maximum of two years.

A number of savings banks have announced plans to fold their banking business into separate entities and seek a listing in the stock market to raise the necessary capital. This is the route being taken by Bankia, the commercial brand of an alliance of seven cajas led by Caja Madrid.

In its recapitalization plans sent to the central bank Unnim left a number of avenues open to meeting the new requirements, including tapping the FROB, seeking private funding and merging with a bigger lender.

An earlier bout of consolidation of the country's savings banks, at the bidding of the Bank of Spain, has reduced the number of players in the sector to 17 from 45.

Unnim was formed by the tie-up of Caixa Terrasa, Caixa Sabadell and Caixa Manlleu. But with assets of some 30 billion euros, it remains one of the smaller players. "There's no size limit, but it is not good to remain one of the smaller ones, and our focus is to look for other partners to reach the middle part of the ranking," Ribera said.

Further consolidation, therefore, remains on the cards, particularly in the case of Caja del Mediterráneo (CAM), which was abandoned last month by its merger partners Cajastur, Caja Extremadura and Caja Cantabria over concerns about the state of its finances.

CAM has asked for 2.8 billion euros from the FROB to meet the new capital ratio, a sum that would involve the nationalization of the caja. The alternative would be to find a buyer for Alicante-based CAM, which is heavily exposed to the ailing real estate sector, where property prices on some parts of the Mediterranean coast have fallen by as much as 40 percent.

BBVA, Spain's second-biggest bank, has expressed interest in acquiring CAM at the right price. Other lenders have formally asked for information on CAM, including Santander, the country's biggest bank, its domestic unit Banesto, Banco Popular and Banco Sabadell. The rest of the would-be buyers include BNP, and the cajas Unicaja and Ibercaja, and a group of Basque savings banks.

There is very little time, however, to execute a sale, as the Bank of Spain is due to make its opinion of the sector's recapitalization plans known on April 14, while the banks have until April 28 to approve those plans, incorporating any modifications suggest by the supervisor.

Asked about the problems of some of the cajas, Unnim's Ribera said that part of the fault lay at the Bank of Spain's door. "The Bank of Spain had a complete vision of the cajas, and shares part of the blame (for what has happened)," he said.