Pastor to fail stress tests but won't need capital hike

Banco Pastor on Thursday left it understood that it would fail bank stress tests ? the results of which are due to be announced on Friday by the European Banking Authority (EBA) ? but would not need any further injection of funds to boost its capital.

In a statement to the National Securities Commission (CNMV), Banco Pastor said that once provisions it made in its balance sheet at the end of last year and a convertible bond issue are incorporated, it would "pass the stress tests under any supposed macroeconomic scenario."

The EBA has not allowed the convertible bond issue and generic provisions to be included in the calculation of Banco Pastor's capital base. However, the supervisor's report is expected to indicate that once these elements are factored in, the bank will meet the minimum capital requirement ratio of 5 percent of risk-weighted capital and will not need to boost its capital.

Savings banks CatalunyaXaixa, Unnim and La Caja del Mediterráneo (CAM) are also expected to fail the stress tests.

In a filing Thursday to the CNMV, CAM said the Orderly Bank Restructuring Fund (FROB) had rejected its request for an injection of 2.8 billion euros in state funding to take the form of convertible preference shares, which have no voting rights.

The FROB instead wants the injection of funds to take the form of a direct equity stake in the commercial bank to be set up by CAM under the name Banco CAM, implying a de-facto nationalization. The FROB is expected to have a majority stake in Banco CAM.

Under the tests, Spanish banks in general will not be allowed to use generic, or anti-cyclical provisions, to count as capital. The Bank of Spain is also stricter in its definition of risk-weighted assets.

All the other Spanish banks are expected to pass the tests, which were drawn up with a view to enhancing transparency and instilling confidence in lenders to ease their access to funding. The results of the tests are due to be announced on Friday after the markets close.

Bankia and Banca Cívica ? commercial banks set up as part of the merger of several, as savings banks are known ? have launched initial public offerings to raise funds to meet the new solvency requirements being imposed by the Bank of Spain, which require lenders to have minimum core capital of 8 percent, and 10 percent in the case of weaker banks.

Bankia and Banca Cívica are due to list on the Spanish exchanges this month, with the launch of their IPOs complicated by the latest bout of turbulence in the euro-zone sovereign debt markets, which has spilled over onto the stock markets, in particular banking stocks.