CEISS to be nationalized and sold off

State to inject 604 million euros to cover hole in failed lender after merger fails to materialize

Banco CEISS, the lender that emerged from the merger of the savings banks Caja España and Caja Duero, is to be nationalized and sold off after a valuation found it had negative net worth of 288 million euros, the Bank of Spain’s Orderly Bank Restructuring Fund (FROB) said Friday.

The situation at CEISS formed part of the FROB’s valuation of financial health among the denominated Group 2 banks included in the European bailout for the domestic banking sector. Of the others in this group, three had positive balance: Liberbank with 1.113 billion euros, Banco Grupo Caja 3 with 370 million, and Banco Mare Nostrum (BMN) with 569 million. Banco Gallego, a unit of the nationalized Novagalicia Banco, had a net negative worth of 150 million euros.

“These valuations will serve as the basis for implementation of the public financial support envisaged in the plans for the resolution or restructuring of these institutions approved on December 19, 2012 by the Spanish authorities and December 2012 by the European Commission, except in the case of Banco Gallego, for which the dates of approval were November 27 and November 28 respectively,” the FROB said in a statement.

The state will make an injection of 604 million euros in CEISS. In all probability, the lender’s sale will result in a loss to taxpayers. CEISS had been in talks for over a year to merge with Unicaja without any final agreement being reached.

BMN to receive 730 million

BMN could also end up under state control despite having a positive net worth. The FROB plans to inject 730 million into the lender, which will give it control of 65 percent of its capital. However, BMN’s management team will be kept in place as the bank is considered to be in a process of restructuring rather than liquidation. As in the case of the nationalized Bankia, the management will have five years to turn the bank around and prepare for its privatization.

Liberbank will receive 124 million from the state. The lender is planning to list on the stock market in order to return the money to the state. The state will inject a further 407 million euros in Caja 3, which is in the process of merging with Ibercaja.

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