More Spanish Building Society Mergers
June 8th, 2009
Cajasur on Friday said it had held informal merger talks with Unicaja and Caja de Murcia, marking the latest attempt by Spanish savings banks to join forces to confront a rapid rise in property debt defaults.
The talks between the savings banks in the Andalusia and Murcia regions of southern Spain follow the country’s first bank intervention of the financial crisis and a quadrupling of financial system bad loans in the past 12 months.
‘The talks are absolutely preliminary,’ said a Cajasur spokesman of discussions with Unicaja and Caja de Murcia. ‘We are in the process of trying to cut costs in response to rising bad loans.’
Spain’s banking system has weathered the global crisis better than many others in Europe, thanks to tight regulation and conservative investment policies.
Banks now face soaring defaults on housing loans after the global crisis snuffed out a decade-long Spanish property and consumer credit boom in which household debt tripled.
In March, the Bank of Spain was forced to take over the running of savings bank Caja Castilla La Mancha and provide 9 billion euros ($12.8 billion) in government guarantees to back the bank after its planned merger with Unicaja failed.
Spanish Prime Minister Jose Luis Rodriguez Zapatero on Friday said the government was in talks with the opposition to create a fund to support struggling institutions, but gave no indication when the long-awaited project would reach Congress.
‘The majority of savings banks are responding well, some of them have problems, but we are going to give them help so they can get through these two or three difficult years we have ahead,’ Zapatero said in an television interview on Spanish National Television.
‘We are going to make an effort to support them and invite them to launch restructuring, mergers, so that the sector is the right size after the crisis.’
Large Spanish banks like Santander and BBVA diversified out of the domestic property earlier this decade and face far lower default levels than the country’s savings banks.
As of March 31, Cajasur had a bad loan rate of 6.54 percent of outstanding credit, compared with 4.27 percent for all lending institutions in Spain, according to Cajasur and Bank of Spain data.
Complicating mergers between Spain’s 45 large savings banks is the political influence of regional governments which must give final approval for any deal.
A merger between Unicaja and Cajasur has the backing of the Andalusian regional government, Spain’s El Economista newspaper reported on Friday.
The Andalusian government does not support a tie up between Cajasur and Caja de Murcia, as it would dilute its control of the combined bank, El Economista reported.
Officials at Unicaja, Caja de Murcia and the Andalusian government were not immediately available for comment.
Story from Forbes
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