Bankia among Spanish lenders winning EU approval for rescue
BFA-Bankia SA (BKIA) and three other Spanish nationalized lenders won European Union approval for government bailouts, paving the way for them to receive recapitalizations next month.
Bankia, Novagalicia Banco and Catalunya Banc will reduce balance sheets by more than 60 percent by 2017 compared with 2010, exit real-estate lending and limit their wholesale businesses, the European Commission said Wednesday.
The restructuring plans agreed with EU regulators will create a healthier financial system and “a solvent base to play an active role in the growth of Spain from now on,” EU Competition Commissioner Joaquin Almunia said in the statement.
The EU decision will allow Spain’s rescue fund, the FROB, to receive as much as 100 billion euros ($130 billion) of aid from the EU to help stabilize its banking system in the first half of December, the Bank of Spain said yesterday. The FROB will recapitalize the banks “once the necessary corpo- rate operations have been completed,” it said in an emailed statement.
Spain has pledged to sell Novagalicia Banco and Catalunya Banc within five years or wind them down. Banco de Valencia was bought by CaixaBank SA for 1 euro yesterday. The restructuring plans foresee “subordinated liability exercises” and the transfer of impaired assets to Spain’s bad bank, a process that will reduce the Bankia group’s capital needs to 17.96 billion euros and those of Novagalicia Banco to 5.43 billion euros and 9.08 billion euros for Catalunya Banc, the commission said. Banco de Valencia’s capital needs are 4.5 billion euros.
Some 45 billion euros in assets will be transferred to the Spanish bad bank, Sareb, Almunia told reporters in Brussels today. Bankia, Novagalicia Banco and Catalunya Banc will sell units to help fund the restructuring, Almunia said. Their preferred shareholders and other subordinated debt holders will absorb losses and pay some of the costs of the restructuring, reducing Spanish government support by about 10 billion euros, the EU said in the statement. The banks will be banned from making acquisitions or coupon payments and from using state aid for commercially aggressive practices.
Almunia said he plans to decide on restructuring plans for Liberbank SA, Banco Mare Nostrum SA, Banco Caja 3 and Ceiss on Dec. 20.
Bankia, a nationalized lender that in May requested 19 billion euros from the government to clean up bad loans, is planning to announce a new strategic plan through 2015 later today. Chairman Jose Ignacio Goirigolzarri told shareholders in June the bank would seek to reduce its 60 billion euros of non- yielding assets by more than half over three years.
Almunia said the sale of Banco de Valencia to CaixaBank SA ( CABK), Spain’s third-largest lender, was cheaper than winding down the bank which he said was no longer viable without state support. FROB will provide Banco de Valencia a 4.5 billion- euro capital injection, the fund and CaixaBank said in separate statements. FROB will then transfer its stake, which will be at least 90.9 percent, for 1 euro, CaixaBank said.