Only the largest of Spain’s merged savings banks or cajas are likely to succeed in raising capital through stock market offerings because of uncertainty about corporate governance and the value of property assets, according to Madrid investment bankers and senior commercial bank executives.

Banks and cajas have been given until Monday to tell the Bank of Spain how they intend to raise new capital.

They are then supposed to achieve these goals by the end of September, so that listed lenders prove their solvency by securing core tier one capital ratios of at least 8 per cent of assets, and unlisted ones reach ratios of 10 per cent or more.

Using these targets, the Bank of Spain calculated this month that Spanish lenders needed a total of €15.15bn ($21.5bn) in fresh capital – of which Bankia, the merged group of Caja Madrid and six others, would need €5.77bn if it failed to list and €1.79bn if it succeeded.

Credit rating agencies and analysts say the financial system’s total needs could be more than double the Bank of Spain estimates.

Even Bankia – now the largest bank in the domestic market and a systemically important institution regarded as “too big to fail” – will find it hard to launch an initial public offering by June as planned, Spanish bankers say. That is because its seven parts have not been fully integrated and Rodrigo Rato, chairman, has yet to name a chief executive.

Bankia will try to raise more than €2bn but has not decided whether it will need to park its impaired assets in a “bad bank” to make the offer sufficiently attractive.

“It’s a sector that’s being restructured in a brutal and very rapid manner,” says one Madrid banker.

“For Bankia I think the calendar is too tight. There’s a big question about who’s going to be the number two.”

Another banker says: “It [Bankia] needs proper corporate governance before it can be listed. It needs a proper management team.”

Only the Caixabank subsidiary being set up by La Caixa, the Barcelona savings bank, is regarded as a stock market certainty by the summer.

Caixabank will be listed via Criteria, the existing industrial holding company, and will benefit from a robust core capital ratio of 10.9 per cent, partly because it will be relieved of impaired property assets through the creation of an unlisted “bad bank”.

The next most likely listing is of Banca Cívica, a combination of five cajas that has appointed Credit Suisse as its global co-ordinator and plans to raise €1bn so that between a quarter and 40 per cent of the bank would be held by outside investors.

“We’ve been preparing for a share offering for a year,” says Enrique Goñi Beltrán de Garizurieta, Cívica’s chairman and chief executive.

For other cajas and would-be banks – the number of caja groups has already been reduced from 45 to 17 through mergers – there is scant chance of an imminent stock exchange listing, and certainly not at the valuation of 0.8 times book proposed by La Caixa.

“How do you convince a City investor to pay 0.6 or 0.7 times book value for an institution with no history?” says one Spanish commercial banker.

The alternatives to listing are either impractical or unpalatable to the managers of the cajas. One possibility is to sell a stake before any listing to a hedge fund, private equity group or sovereign wealth fund (Qatar has made a vague offer to invest €300m in Spanish cajas).

But the preliminary offers suggested by visiting executives from the likes of Paulson & Co, the US hedge fund, have so far been too low to attract the interest of potential sellers, bankers say.

Another way for the cajas to raise capital is for them to realise capital gains on non-core industrial holdings they amassed in the years of plenty before the Spanish housing market began to collapse in 2007 and the global financial crisis struck the following year.

La Caixa and Bankia have substantial holdings they could liquidate but many of the smaller cajas have stakes in bankrupt property developers and little of value to sell.

“We’re looking through the portfolios and most them are puny and pathetic,” says one investment banker.

For weaker cajas, one viable strategy is to merge with or be taken over by a better capitalised institution, whether it be another caja or a big listed bank such as Santander.

In the start of a new round of consolidation, the capital-rich Unicaja is negotiating an agreement with the Caja España-Caja Duero group which, if successful, would save them the effort of raising the extra €463m in capital the Bank of Spain says they need.

Three Basque country cajas – BBK, which took over the troubled CajaSur, along with Kutxa and Vital – also plan to merge

The last and generally least popular option is to seek funds from the official Fund for Orderly Bank Restructuring, known as the Frob from its Spanish initials, and so submit to partial nationalisation.

That is what the weaker cajas groups, such as Banco Base, are expected to do, and what the region of Galicia has already announced for the merged caja Novacaixagalicia.

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