UPDATE: La Caixa Plans To Spinoff Bank Holdings To Criteria
January 27 2011 - 6:50AM
Dow Jones News
Spanish savings bank La Caixa said Thursday that it plans to
transfer its banking business to listed unit Criteria CaixaCorp SA
(CRI.MC), in a bold restructuring effort to improve management and
its access to capital markets.
Such a move by Barcelona-based La Caixa, the biggest and
healthiest of the large savings banks, could set an example for
other "cajas" to follow, analysts say. In the wake of the
international financial crisis, Spain's government and central bank
are pressuring the mutually owned cajas to spin off their banking
operations into incorporated companies that can list on the stock
market to improve accountability and funding options.
Criteria said in a filing with regulators Thursday that
directors from both companies will analyze and approve the asset
"reorganization" later Monday.
The potential asset restructuring between La Caixa and Criteria
could create the country's third-largest listed financial
institution by assets, only behind local giants Banco Santander SA
(STD) and Banco Bilbao Vizcaya Argentaria SA (BBVA).
La Caixa, which controls 10% of the country's loans and
deposits, recently modified its bylaws, opening the door for a
potential restructuring of its banking operations. Such a
restructuring would also require the reshuffling of some assets
held by Criteria, which owns stakes in financial services companies
abroad.
Unprecedented economic turmoil and a rising pile of bad loans
linked to the implosion of the country's once mighty real estate
sector is forcing the cajas to seek fresh alternatives to raise
capital, and also pursue market discipline to improve transparency
and foster efficiency.
On Monday, the government raised capital requirements for all
financial institutions and said it would require some cajas to have
even higher levels. The move aims to accelerate the transformation
of cajas into listed banks.
The government also overhauled regulations to allow the partial
nationalization of ailing cajas and enable the injection of fresh
capital into them.
The clean-up of banks is a key part of Spain's effort to shore
up investor confidence in the euro zone's fourth-largest economy.
Spain's borrowing costs sky-rocketed after Ireland's finances
buckled under the weight of massive loan losses among its banks.
Ireland is also suffering from a massive housing bust.
With close ties to local communities and often controlled by
local governments, Spain's cajas have borne the brunt of the
collapse of Spain's decade-long housing boom. Their fast-rising bad
debt levels, combined with a lack of transparency, have stoked
investor concerns and created severe financing difficulties for
both the cajas and the country's listed banks.
Last year, the Barcelona-based giant approached listed Catalan
rival Banco Sabadell SA (SAB.MC) to discuss a potential merger that
would have given La Caixa a market listing and become a full bank,
according to people familiar with the situation.
The talks between the two companies didn't lead to formal
negotiations, as the overlap and geographical concentration of the
two banks in their home Catalan markets across northeastern Spain
would have resulted in massive layoffs and risk concentration at a
time of unprecedented economic turmoil, these people added.
-By Santiago Perez, Dow Jones Newswires; (34) 91 395 8120;
djmadrid@dowjones.com
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