The recession in Spain accompanied by rampant unemployment has complicated the situation for the country’s banks, particularly those that have been nationalized and need to sell part of their business in a bare market.
With this scenario on the table and after the failure of the privatization tender of CatalunyaBanc, the state’s Orderly Bank Restructuring Fund (FROB) charged consultant McKinsey to come up with suggestions on how to extract the most value from the three nationalized banks: Bankia, CatalunyaBanc and NCG Banco, the commercial banking arms respectively of BFA, CatalunyaCaixa and Novagalicia.
As EL PAÍS has learned, McKinsey believes that unlike Bankia, neither the Catalan nor the Galician lender will undergo a revaluation of their worth over time that would allow the state to recoup taxpayer money injected into them. As a result, the idea of forming a holding to group the three nationalized lenders together is losing weight.
So far the state has injected 12.050 billion euros into CatalunyaBanc and 8.981 billion in Novagalicia, sums that exceed the amount injected into Bankia relative to the size of their operations.
FROB, which is due to decide shortly how to proceed, is coming around to the conclusion, particularly after the failure of the public tender for CatalunyaBanc in March, that offloading CatalunyaBanc and Novagalicia is not feasible without changing the conditions of the sale.
The European Commission is averse to using previous arrangements in the sale of banks taken over by the state under which the buyer was awarded a so-called asset protection scheme that limited losses on the assets of the acquired lender.
As a result, the FROB, the Bank of Spain and the Economy Ministry are looking at the possibility of cleaning up the banks’ balance sheets of doubtful assets before selling them.
One possibility would be to transfer potentially bad assets to the asset management corporation Sareb, the bad bank set up to absorb the toxic real estate assets of the banks. This would be feasible because the statutes of Sareb do not prohibit it from accepting damaged assets that are not related to the real estate sector.
The two banks’ stakes in companies and other businesses could also be hived off and sold.
One of the solutions proposed by McKinsey is to group the activities of CatalunyaBanc and Novagalicia around listed Bankia in the form of a so-called virtual merger, a formula used in the amalgamation of the country’s savings banks. However, this solution created legal problems, while Brussels does not look favorably on creating a large state-owned bank.
The most drastic solution put forward by the consultant is to clean up CatalunyaBanc and Novagalicia’s balance sheets to make them more attractive to buyers. The managers of Spain’s top banks have acknowledged that they have taken advantage of the situation at the nationalized banks to steal clients from them.
The lenders taken over by the state also face the issue of tarnished brands after the sale of preferred shares to unsophisticated clients, who subsequently suffered large losses on the products they acquired.
Under the terms of the loan of around 40 billion euros from Spain’s European partners to clean up the banks, lenders receiving public funds must slim down their activities before being sold off. “They’re fighting on many fronts at the same time,” one of the nationalized banks’ competitors says. “It’s very difficult to survive in this environment.”