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Spaniards Bail Out Guaranty Financial

Tyler Durden's picture




 

One would think that with a 17.8% unemployment rate the Spaniards have enough problems, right? Wrong. According to Bloomberg the winning (and highly subsidized) bidder for Guaranty is BBVA (Banco Bilbao Vizcaya Argentaria SA), Spain's second-largest bank by market value (probably not saying much).

Furthermore, one wonders just what additional bailout acumen BBVA has that Blackstone, JP Morgan, Felxpoint, US Bancorp do not. Then again, BVA already has a rather extensive exposure in the Alabama and Texas region, with 583 branches, after purchasing Compass Bancshares for $9 billion in 2007. And as everyone knows, synergies is what it is all about, especially if synergies is just another name for FDIC-povided taxpayer cash.

From Bloomberg:

Aug. 19 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank by market value, was selected to take over the assets of Guaranty Financial Group Inc. in a government-assisted transaction, according to people familiar with the situation.

The Austin, Texas-based lender said last month that it was unable to raise capital as demanded by regulators and will probably fail. The Office of Thrift Supervision has taken over board functions, directed the bank to turn itself over to the Federal Deposit Insurance Corp. and is pursuing transactions likely to wipe out shareholders, Guaranty said in a July 23 filing with the Securities and Exchange Commission.

Bids for the bank were due on Aug. 18, the people said.

BBVA spokesman Ed Bilek and FDIC spokesman Andrew Gray declined to comment. A call to Guaranty spokesman John Wessman wasn’t immediately returned.

Blackstone Group LP, Gerald Ford’s Flexpoint and U.S.

Bancorp were among other groups considering bids for assets of Guaranty, people familiar with the situation said earlier.

Guaranty’s biggest shareholders include billionaire Carl Icahn and Omni Hotels owner Robert Rowling.

BVA ranks as the third-largest bank by assets in Alabama and fourth in Texas with 583 branches in the U.S., according to the company’s Web site. The company acquired Birmingham-based Compass Bancshares Inc. in 2007 for $9 billion.

Francisco Gonzalez, chairman and chief executive officer, of BBVA, discussed his interest in acquiring failed U.S. banks during visits earlier this year with Federal Deposit Insurance Corp. Chairman Sheila Bair, the Treasury Department and Federal Reserve, the Wall Street Journal reported yesterday.

And in order for readers to get a first person perspective of the exhaustive diligence that occurred, we present Guaranty's most recent notification of late filing, which concludes with this ominous warning that "any transaction would not be expected to result in the receipt of any proceeds by the stockholders of the Company", run translated through Babel Fish from English to Spanish:

NARRATIVA
 

Estado por debajo de razonable en detalle por qué las formas 10-K,
20-F, 11-K, 10-Q, 10-D, N-SAR, N-RSE, o el informe de transición o
parte de ella, no puede ser presentada dentro del período de tiempo.

Garantía Grupo Financiero Inc. (la "Compañía") es la presentación
de la presente notificación de la presentación tardía en el Formulario
12 ter-25 con respecto a la Compañía Informe Trimestral en el
Formulario 10-Q para el trimestre terminado el 30 de junio de 2009 (el
"Segundo Trimestre de 2009 Formulario 10-Q "). La empresa no puede, sin
esfuerzo y costo razonable, oportuno expediente para el segundo
trimestre 2009 Formulario 10-Q, porque la Compañía no ha completado sus
estados financieros para el año fiscal que terminó el 31 de diciembre
de 2008 o los trimestres terminado el 31 de marzo de 2009 y junio de
30, 2009.

Como se ha divulgado en el actual Informe en el Formulario 8-K
presentado por la Compañía el 23 de julio de 2009 (el "23 de julio
8-K"), la Sociedad y de su filial, Banco de garantía (el "Banco")
presentó una modificación de ahorro Informe Financiero ( "TGF") como de
y para los tres meses finalizados el 31 de marzo de 2009 refleja
activos sustanciales de saneamiento que se tradujo en el Banco negativo
de capital y que se considere críticamente undercapitalized como se
refleja en la tasa global de fecundidad a partir de esa fecha. Por
favor vea el 23 de julio 8-K para una descripción más detallada de la
TGF. Como se describe en el 23 de julio 8-K, la Compañía no cree que es
posible plantear un capital suficiente para cumplir con las órdenes de
cesación de las prácticas descritas en el Informe actual de la Compañía
en el Formulario 8-K presentado el 8 de abril de 2009. En consecuencia,
la Compañía ya no cree que sea capaz de continuar como empresa en
marcha.

La Sociedad sigue cooperando con la Office of Thrift Supervision
(el "OET") y la Federal Deposit Insurance Corporation ( "FDIC"), ya que
las alternativas para proseguir el negocio del Banco. Toda operación de
este tipo no se espera que como resultado la recepción de cualquier
producto por los accionistas de la Compañía.

 

 

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Wed, 08/19/2009 - 16:47 | 41589 gridlocked
gridlocked's picture

Santander bought Sovereign during the height of the crisis and it was said that Spainish banks were in good shape at the time.

Can a US bank buy a Spainish bank? I understand we cannot buy Canadian banks yet they have acquired several US banks.

 

Just more assets going overseas. They have to spend dollars somewhere right?

Wed, 08/19/2009 - 21:14 | 41645 Audicar (not verified)
Audicar's picture

Goverments in everywhere are buying votes via taxes, and we are awakening in a world where banks own the countries.

good articles; my newest bookmarked finance site ..http://www..
hat tip: finance news & finance opinions

Wed, 08/19/2009 - 18:54 | 41724 rigger mortice
rigger mortice's picture

'Just more assets going overseas.' surely you want rid?

Wed, 08/19/2009 - 16:50 | 41595 avatar
avatar's picture

shouting out from austin! yeaaaaahhh booay thanks for all that olive oil spain!

Wed, 08/19/2009 - 16:51 | 41596 Arm
Arm's picture

BBVA actually has one of the healthiest balance sheets in Europe/world.  This will of course dilute that.

Wed, 08/19/2009 - 17:44 | 41669 economicmorphine
economicmorphine's picture

No offense intended, Arm, but this is not a healthy balance sheet.  No way, no how.

 

http://finance.yahoo.com/q/bs?s=BBV&annual

Wed, 08/19/2009 - 18:53 | 41722 Arm
Arm's picture

I understand your point.  However, banks are some of the hardest firms to value.  Looking at a Yahoo screen of the current balance sheet (on a standalone basis) is not really enough to judge the solvency of the bank.  For example, you have to take into account their loan book composition, the loan loss provision, tier1 capital ratios, the accounting standard used, their hedging and then top it off with macro operational region analysis.

My point is that the discussion would be pretty long, technical, and I don't have access to the banking sell side research papers that I would need to prove my point.  I can summarize it in that BBVA is considered by analysts in Europe to be amongst the most solvent.  Others in this group are Santander and BNP.  

 

There are plenty of crap Spanish banks if that is what you want to look for.  Popular and Caja Madrid to name the cream of the crop.  I would short them, but I think they are banned.

 

 

Wed, 08/19/2009 - 21:54 | 41874 Big Al
Big Al's picture

It's also a meaningless balance sheet.  Yahoo has translated the real balance sheet into the balance sheet format used for industrial companies.   It doesn't show the amount or type of deposits; the amount of investment securities, the amount of loans, or the loan loss reserve.

About the only the only thing this balance sheet proves is that BBVA doesn't have enough shareholder equity to satisfy US  capitalization ratios.

Wed, 08/19/2009 - 16:54 | 41599 Miles Kendig
Miles Kendig's picture

Just a return gift for all of those side letters paid at par by the Fed.

Wed, 08/19/2009 - 16:57 | 41602 zanahorias
zanahorias's picture

Almost 18%????

only?

Little tricks US administration should learn (ironic):

a) to force unemployees to take (useless) education trainings (then erase those ones from unemployment lists as they are in training)

b) to extend some unemployment insurance beyond the temp-limits... but again, erasing those ones from the unemployment list and sending them to work training 

and that´s why we achive the miracle of only have 16% unemployment rate... better non to speak about other subsides.

Wed, 08/19/2009 - 16:58 | 41603 che
che's picture

gridlocked - what a load of bollocks, spanish have one of the largest current account deficits in the world

arm - bbva the healthies in europe/world? only as long as they can park their crap with the ecb

Wed, 08/19/2009 - 17:14 | 41624 Arm
Arm's picture

All banks are insolvent.  In comparison to other banks BBVA is fine and dandy.

It is mostly a residential mortgage business with half the revenue coming from Mexico.  Until now, neither Mexico, nor residential mortgages in Spain are showing overly alarming default rates.  They have very limited exposure to derivative securities, so essentially their loans get market down by cents, not marked down to cents like more sophisticated outfits.

Wed, 08/19/2009 - 17:21 | 41642 zanahorias
zanahorias's picture

BBVA during this years has employed a lot of people to derivative units...

do you believe those default rates? you know they transfer the risk of such mortages mainly to other EU countries such Germany.

the only point is that is in better shape than others...

Wed, 08/19/2009 - 17:23 | 41648 Arm
Arm's picture

In the land of the blind, the one eyed man is king.

Wed, 08/19/2009 - 17:27 | 41660 zanahorias
zanahorias's picture

from lost to the river hahaha

Wed, 08/19/2009 - 23:30 | 41951 gridlocked
gridlocked's picture

I didn't say they were in good shape. I just remember what the media said after Santander took over Sovereign. I have to assume they were in better shape than Sovereign was though.

 

gridlocked - what a load of bollocks, spanish have one of the largest current account deficits in the world

Wed, 08/19/2009 - 16:59 | 41604 Anonymous
Anonymous's picture

How much is this private sector "bailout" going to cost the FDIC?

Wed, 08/19/2009 - 16:59 | 41605 Anonymous
Anonymous's picture

In the tourist areas of Spain, the unemployment rate is over 30%. I imagine that there are some areas where unemployment is over 50%.

Wed, 08/19/2009 - 17:12 | 41616 zanahorias
zanahorias's picture

In the south, but such rate is not real, there´s underwater employment (that obviously don´t generate taxes, and obviously the false unemployed takes money from the goverment).

The rate is high very high but not that numbers.

Wed, 08/19/2009 - 21:14 | 41647 Audicar (not verified)
Audicar's picture

Please forward this to Timmy, Bennie, Barack, Barney, Nancy, and Harry, and tell them that we are watching.

good articles; my newest bookmarked finance site ..http://www..
hat tip: finance news & finance opinions

Wed, 08/19/2009 - 17:04 | 41608 zanahorias
zanahorias's picture

Arm, no problem if there´s any toxic there for sure they will make small packs who will try to sell to germans, except they learn the lesson. In that case, we have a lot of innocent grandmothers... btw all big world banks are laughing at everyone.

Wed, 08/19/2009 - 17:09 | 41613 zanahorias
zanahorias's picture

Our housing bubble is by far worse than yours...

on average a square meter in the US is 1000$

in Spain 2500 €, do the math... both numbers I presume are statistically smoothed to downside but for gap comparison is enough.

Wed, 08/19/2009 - 17:21 | 41641 Arm
Arm's picture

Your are partially correct, the Spànish housing bubble is worse than in the United States or England.  However, this does not follow that Spanish banks are worse off.

1) Spanish banks have higher loan loss provisions than any banks in the world (courtesy of Banco de España)

2) Spanish banks do not have significant derivative exposure.  Remember derivatives are nuclear weapons.  They can and do get marked down to zero like all the crap sold to German banks.  Auctioning off a Spanish appartment with a 30%-50% discount might still cover a significant part of the bank's loan balance.  In other words, Spanish banks may end up taking 80 cents on the dollar.  Ask SIV investors if that sounds appetizing in comparison...

Wed, 08/19/2009 - 17:40 | 41655 zanahorias
zanahorias's picture

In comparison you´re right.

My believes are BBVA/Santander have provisioned less than foreingn banks did. But also I agree they can cover a lot more than abroad banks.

Regarding foreclosures, as Popular Bank said, spanish banks at this low rates prefer to have the properties on the balance instead of declare insolvent the debtor, because they can play about how and when declare the loss.

Wed, 08/19/2009 - 17:10 | 41614 Sqworl
Sqworl's picture

Yo quiero saber quien fue el Tio que gano la plata?

Wed, 08/19/2009 - 17:14 | 41622 zanahorias
zanahorias's picture

Goverments in everywhere are buying votes via taxes, and we are awakening in a world where banks own the countries.

 

Wed, 08/19/2009 - 18:58 | 41729 Anonymous
Anonymous's picture

No se quien gano la planta, pero es bien claro a quien van a chingar.

Wed, 08/19/2009 - 17:20 | 41639 Anonymous
Anonymous's picture

Wow, so the FDIC couldn't line up a U.S. buyer? Sounds like they are having a harder and harder time juggling the bank failures. Should be interesting to see who they line up for Corus. The Corus bids are due September 3.

Wed, 08/19/2009 - 17:22 | 41644 Ducky
Ducky's picture

Yesterday's WSJ article said it is a traditional lending bank and does not do all the other crap that got a lot of other banks in trouble.

Wed, 08/19/2009 - 17:23 | 41646 Gilgamesh
Gilgamesh's picture

This is fair payoff for them to drop their claims that the Black Swan of '07 belongs to Spain, and surrendering rightful ownership to America.

 

Shortly after Nassim Taleb announced the discovery of the "Black Swan” in May 2007, the Kingdom of Spain filed a claim in the case.

http://www.shipwreck.net/blackswan.php

 

In lieu of $500mm in gold and silver coins please accept these $14.4B in assets, and branches in which your native tongue is the primary business language.

Wed, 08/19/2009 - 20:55 | 41831 Wilderman
Wilderman's picture

@ OP:

Hang on to yer hats, boys! It's gonna be a whole lot tuffer to turn Tejas back into a republic when the banks are owned by feriegners! 

Once and future Texan

(That is, if they succeed in seccession.  Always willing to do my part, as needed, but am currently holding out some hope that the inland NW will beat them to the punch)

Wed, 08/19/2009 - 23:47 | 41959 Anonymous
Anonymous's picture

the irony is simply delicious

Wed, 08/19/2009 - 21:13 | 41649 Audicar (not verified)
Audicar's picture

CNBC hasn't come up with theirs yet.  I'm sure they're scratching their heads right now trying to use something from their archives

good articles; my newest bookmarked finance site ..http://www..
hat tip: finance news & finance opinions

Wed, 08/19/2009 - 17:35 | 41664 Hephasteus
Hephasteus's picture

Didn't they move into some oriental country one time and make the food better while simultaneously introducing spanish horse teeth inside tiny asian mouths genes.

Wed, 08/19/2009 - 20:06 | 41787 Anonymous
Anonymous's picture

well, may be the Basques population need a safer place to put their money in. Or may be Alabama is going to be the next Iceland of the world. Still waiting on RF to be bought too..................

Thu, 08/20/2009 - 00:22 | 41980 Anonymous
Anonymous's picture

FDIC, live to die another day.
Spanish banks buy Guaranty? What's their guaranty?
Guarano?
Maybe a Spanish gov't ploy to liquidate lotta US treasuries and take a bank?
Monopoly money anyway. The weekend stick saves are morphing into anything short of a straight face test save.

This is the most amusing charade in a century or more of charades. That this charade, like the others, may birth wars, rumours of wars, and financial carnage is not so funny.

Thick as thieves, these bankers and governeurs! And internationally. Wasn't Britain formally bankrupt in 1917 when the USA entered the Great War, used their magnificent language powers and propaganda to make believe otherwise?

Making believe still, and mostly otherwise and little wise.

The USA is absolutely, completely, inexorably, deplorably bankrupt in its morals, its institutions, its means of accounting, its honour. Should have a ring straked, emaciated kine, with pied yellow patches of craveness as its emblem. A cloven hoof holding profane gluttony on the right while deflowered innocence might frame the left.

Its strength is a tea brewed with a million cowards to produce a semblance of one real upright person.

Now again we see the conquistadors take the primitive inhabitants to teach them sivilisation, by stripping them of their gold and silver. Au & Ag, what's not in your wallet?

Thu, 08/20/2009 - 05:40 | 42043 Anonymous
Anonymous's picture

I´m surprised that noone has mentioned it yet, but Spain´s unemployment figure is driven in large part by the enormous influx of north africans looking for the land of fortune.

Thu, 08/20/2009 - 11:27 | 42240 Anonymous
Anonymous's picture

"According to Bloomberg the winning (and highly subsidized) bidder for Guaranty is BBVA (Banco Bilbao Vizcaya Argentaria SA), Spain's second-largest bank by market value (probably not saying much)."

From Credit Writedowns:
"Santander has a market capitalization of over 80 billion Euros (nearly $120 billion) while BBVA has a market cap over 40 billion Euros (nearly $60 billion). By comparison, only Goldman Sachs, Wells Fargo, JPMorgan Chase and Bank of America are bigger in the U.S., a country with six times the population of Spain."

Funny comments are useless when not supported by facts.

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