La Caixa to buy stricken Banco de Valencia: sources

The Bank of Spain’s Orderly Bank Restructuring Fund (FROB) has awarded nationalized lender Banco de Valencia to La Caixa for a “very small” sum, various sources said Tuesday.

Banco de Valencia, which was taken over by the FROB in November of last year after falling foul of its over-exposure to the ailing real estate sector, had been on the block for a year. However, the tender process was halted as independent consultant Oliver Wyman conducted its audit of the Spain banking sector’s capital needs. The tender process was reinitiated two weeks ago.

The source said La Caixa beat out offers from Bankinter and BBVA after reaching the conclusion that La Caixa’s business model made a better fit. To ensure its viability, the state has already made a capital injection in Banco de Valencia of one billion euros and has provided a further two billion in liquidity.

Banco de Valencia will transfer toxic assets to the asset management corporation (Sareb) being set up by the government and has made deep cuts in its workforce and branch network to make it more attractive to potential buyers. Banco de Valencia’s shares were up 12.50 percent in late trading.

The FROB is expected to officially announce the winner of the tender for Banco de Valencia later Tuesday.

The European Commission is due to announce on Wednesday its restructuring demands for banks that will receive European funds to recapitalize, which the government says total about 40 billion euros.