Banco Sabadell, the Spanish lender, has begun sounding out investors about a rights issue worth up to €1.2bn as part of a cascade of recapitalisations and mergers predicted across the Spanish banking sector following strict new government regulations.
Sabadell, which last year bought Cam, a nationalised saving bank riddled with bad property assets, is preparing to launch the €1bn-€1.2bn share sale after first seeking the permission of its investors later this month. The bank holds an extraordinary general meeting on February 23.
The Catalonia-based lender, which was advised by Deutsche Bank and Nomura during the Cam acquisition, has met investors in London ahead of finalising the rights issue launch, people familiar with those talks said.
Spain’s conservative government last week announced new measures to force banks to set aside an extra €50bn in provisions for real estate assets by the end of this year. But it granted an extra year to banks that merged with rivals as part of a drive to consolidate one of the most saturated retail lending markets in Europe.
After buying Cam – which it did only with the help of an official asset protection scheme to shield it from Cam’s multibillion-euro losses – Sabadell already benefits from the two-year period to apply the extra provisions, but its executives say they are want to complete the provisioning in one year anyway.
Bankia, a large bank formed out of the merger of Caja Madrid and six other savings banks, is considering a bid for a smaller bank following the new provisioning measures announced by Luis de Guindos, economy minister, because it would thereby benefit from the two-year window to apply the new rules.
Bankia, led by Rodrigo Rato, former IMF managing director, has said publicly that it can comply with the strict new requirements by converting some debt and preference shares into equity, using its €1.1bn of stored “generic” bad loan provisions, selling non-core assets and doing “sale and leaseback” operations for its offices.
But Bankia would nevertheless find it difficult to come up with the €6bn-€7bn required within a year, and is therefore considering a bid for Unnim, a smaller bank nationalised by the state last year, according to people familiar with Bankia’s strategy.
Other possible deals discussed by bankers in Spain include a takeover by BBVA of the nationalised Catalunya Caixa, and the sale of Banco de Valencia by the state to Banco Mare Nostrum.
Bankers in Spain said that several of the country’s domestic focused lenders which had either ruled out share sales to raise more capital, or had found them impossible to achieve, were now reconsidering after January’s stock market rally, and the success of the €7.5bn rights issue by Italy’s UniCredit. Yet, ongoing aversion to Spanish banks from investors made such deals a hard sell, advisers said.
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