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More Spanish Saving Bank "Cold Fusions" - La Caixa In Merger Talks With Caixa Girona
The shadow bailout of the weak(est) Spanish banks continues under the guise of a forced national M&A program, as banks with some toxic asset capacity "merge" with the worse ones. Today's first "cold fusion" casualty is savings Caixa Girona which was merged by Barcelona's massive (in size if not solvency) La Caixa. With the recent change in requirements for loan loss provisioning by the Spanish Central Banks, which will make balance sheets far weaker, we will be bringing you many more such merger news going forward.
More from Reuters:
Spain's largest savings bank, La Caixa, is in merger talks with smaller regional lender Caixa Girona, it said on Friday, as consolidation in the Spanish banking sector gathers pace.
La Caixa said meetings are continuing and an agreement had not yet been reached.
The online newspaper elConfidencial.com had said earlier the deal could be done as early as today.
Following the bailout of savings bank CajaSur by the Bank of Spain last weekend the central bank has been expected to put pressure on some banks to take over smaller rivals whose credit quality has deteriorated sharply due to heavy exposure to the ailing property sector.
The Bank of Spain has said it wants to more than halve the number of small lenders to about 20 by mid-year.
On Monday Fitch downgraded Caixa Girona to BBB from BBB+, citing the ongoing negative effects of the weak Spanish economy and property sector downturn on Girona's asset quality and operating profitability.
"Fitch has lowered the rating of two small Catalan savings banks. One of them (Caixa Girona) is almost at junk bond level, the other (Caixa Laietana) a step above. This is a not a good thing," said Robert Tornabell, banking professor at Esade Business School.
According to figures from Nomura analysts Caixa Girona has assets of 7.8 billion euros ($9.6 billion). La Caixa has assets of 270 billion euros.
Analysts said they were surprised La Caixa was involved in the move but it reflected the Bank of Spain's keenness to complete the consolidation process before the Fund for Orderly Bank Restructuring (FROB) expires at the end of June.
The FROB has up to 99 billion euros to fund the merger process.
"The interesting thing is that La Caixa had been expected to keep its distance from these savings banks mergers, given that it really has excess branches and doesn't need to grow," an analyst at a local brokerage said.
"But the Bank of Spain has probably called on it to help out a bank in the same (Catalonia) region," he said.
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As in the US, it's easier to secretly (or not so secretly) backstop a few megabanks rather than 100 small ones.
Or so goes the theory, at least ... Of course, if such a strategy isn't in fact any easier, then at least it has the added advantage of making the wealthiest bankers even wealthier.
All these cajas are now rushing to merge because the Spanish central bank showed with Cajasur that their patience is running out.
These corrupt regional banks are all insolvent.
The clarity in Mojo Nixon's incomparable tune "I Hate Banks" stand the test of time -
http://www.youtube.com/watch?v=BTFASpNOpHw&feature=related
Ummm I think with cold fusion you're supposed to get more out than you put in...