Banco de Valencia to lay off half of staff under bailout plan

Nationalized lender Banco de Valencia is to lay off 890 employees, slightly more than half of its total workforce of some 1,600, union sources said Monday.

The UGT labor union quoted bank official as saying that the layoffs formed part of the agreement of the sale of the lender to CaixaBank under the bailout of the Spanish banking sector by Spain’s European partners.

Banco de Valencia was taken over in November 2011 by the Bank of Spain’s Orderly Bank Restructuring Fund (FROB) after running into financial problems because of its over-exposure to the country’s ailing real estate sector. It was sold to CaixaBank for a nominal one euro. Banco de Valencia has also received 4.5 billion euros in state funds to recapitalize, while CaixaBank also benefits from a scheme of protection against losses on assets it has taken on with the acquisition of the bank.

Three other banks succumbed to the crash in the property market and needed to be nationalized. Bankia/BFA received 17.96 billion euros from the European bailout to recapitalize, Catalunya Banc 9.08 billion and NCG Banco 5.425 billion.

Under the terms of the rescue package, banks receiving assistance will have to trim their balance sheets by more than 60 percent by 2017, involving massive layoffs and branch closures.

Banco de Valencia had already suffered a so-called labor force adjustment plan (ERE) under which 360 employees were dismissed. At the time of the sale of Banco de Valencia, CaixaBank sources said that half of the acquired lender’s workforce would have to be dismissed and up to nine out of every 10 of its branches closed.

Galician-based NCG Banco plans to lay off a further 2,508 workers through to 2017 and close 327 branches. Brussels has asked the lender to slim down its workforce by a total of 3,334 out of 5,842 at present. Labor unions have organized a series of planned industrial actions to protest the layoffs.

Bankia has also opened talks with labor union representatives on a restructuring plan that includes laying off 5,000 employees and reducing the wages of the staff that remain by between 40 and 50 percent.

As part of the overhaul of its banking sector, the European bailout also included funding to set up a so-called bad bank to absorb the toxic assets of the banking sector. The asset management corporation (Sareb) at the end of last year took charge of 36.695 billion euros in damaged assets at large discounts to their book value from the nationalized banks. NCG Banco transferred 5.707 billion euros, Bankia handed over loans, apartments and land for development worth 22.318 billion, Catalunya Banc offloaded 6.708 billion, while Banco de Valencia disposed of 1.962 billion.

Sareb has up to 15 years to resell those assets from which it expects to make a profit.