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The next round of consolidation in the Spanish banking market is likely to come among unlisted regional savings banks, experts in the sector told mergermarket.

One Madrid-based lawyer who specialises in financial services said that some of the smaller savings banks offered very generous mortgages in the recent housing boom and may need to seek a merger or a bidder for their assets in the months ahead.

The lawyer said that likely bidders would include La Caixa and Caixa Catalunya if any of the savings banks in the Catalan region decide to go on the block.

Meanwhile, a second lawyer who specialises in savings banks (or cajas de ahorros in Spanish) said that Catalunya accounts for 25% of the national market and has a large number of medium-sized savings banks.

Apart from La Caixa and Caixa Catalunya, the region’s savings banks are Caixa de Girona, Caixa Laietana, Caixa de Manlleu, Caixa Manresa, Caixa Penedès, Caixa Sabadell, Caixa Tarragona and Caixa de Terrassa.

Under Spanish regulations, savings banks can merge with other institutions, such as the deal that created market leader La Caixa in 1990. Savings banks can also sell their assets to rival institutions but they cannot be taken over as a legal entity or owned by a listed bank.

The second lawyer said that although in theory there is nothing to stop a savings bank merging with an institution in a different region, in practice it would be very difficult to do so. That is because each savings bank is run by representatives of the civil society in the autonomous region where they are based.

Spokespeople for La Caixa and Caixa Catalunya declined to comment on the possibility of deals in the sector.

One person with knowledge of the thinking of Caixa Catalunya said that rumours of consolidation are nothing new, but added that there were no savings banks for sale at the moment.

There have already been a few steps towards consolidating the savings bank market. Last year, Cajamar and Caja Rural del Duero approved a merger to create a new savings bank called Cajamar Caja Rural, which will have assets in excess of EUR 21.98bn.

A spokesperson for the merged entity said that the savings bank plans to focus on organic growth, although it would study any deals that were proposed. However, the spokesperson said that no further mergers are on the table at the moment.

Meanwhile, the regional government of Andalucia has begun talks to create a large savings bank in the southern region. The institutions in Andalucia include CajaSur, Caja Granada, Caja de Jaen, Unicaja and Cajasol.

The first lawyer said that many savings banks are very exposed to the property market, which entered a rocky period last year. The Bank of Spain said in its Financial Stability Report last April that the recent downturn in property prices is a risk factor for the sector as a whole.

However, the financial regulator also said that the sector is facing a period of uncertainty from a generally sound position as banks have avoided risky off-balance sheet positions. The central bank, which does not distinguish between listed banks and unlisted savings banks, said that liquidity levels are generally sufficient.

One important trend for savings banks in the medium term will be the move to follow La Caixa, which recently listed its investment vehicle, Caixa Criteria, the second lawyer said.

Indeed, Caja Madrid – Spain’s second-largest savings bank after La Caixa – last month announced that it will list up to 30% of its investment arm Cibeles at the end of the year if market conditions are right. Cibeles has assets worth EUR 20bn.

The first lawyer said that although further consolidation is likely in the savings bank market, the listed banks are unlikely to follow suit.

Bankinter was widely seen as the key piece in the puzzle. Market leaders Banco Santander and BBVA are too big to buy more Spanish banks, while the Bank of Spain discourages savings banks like La Caixa from buying listed counterparts.

Credit Agricole of France last year agreed to buy Ramchand Bhavnani’s 14.99% stake in Bankinter for EUR 809m. Since then, the French bank has raised its stake to 20%, compared to 16% for Spanish investor Jaime Botin, but has ruled out a full bid for Bankinter.

One person with knowledge of Credit Agricole’s thinking said that this is a financial stake that fits in with its strategy of investing in good local banks. The person said that Credit Agricole is in talks with Bankinter’s management about joint business opportunities.

The Bank of Spain has given Credit Agricole permission to raise its stake to 29.9% by the end of May. The person said that the bank, which today (Tuesday) announced an EUR 5.9bn rights issue, could seek to extend that deadline.

The central bank has also given Botin permission to raise his stake to 25% by September.

A person with knowledge of Bankinter’s thinking said that Credit Agricole has yet to request board representation.

Meanwhile, the first lawyer said that Credit Agricole’s investment means that the bank should no longer be considered a takeover target, unless the French bank itself one day decides to get full control.

Spokespeople for Bankinter and Credit Agricole declined to comment on the situation.

Credit Agricole’s investment in Bankinter ended a long period of speculation that the bank could be a target for Banco Sabadell, an aggressive Catalan bank that has been growing through acquisitions.

Sabadell has the right to issue convertible bonds worth EUR 2bn if it identifies any targets, even though it has no deals on the radar at the moment, as reported.

Meanwhile, both Santander and BBVA have said recently that their focus is on organic growth, rather than aggressive deals overseas.

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