Bloomberg News

CaixaBank, Civica Study Combining in Spanish Bank Overhaul

March 13, 2012

CaixaBank (CABK) SA, Spain’s fourth- biggest lender, is studying combining with Banca Civica SA (BCIV), a former savings bank, as part of an overhaul of the nation’s financial industry. Civica shares surged.

CaixaBank, based in Barcelona, and Banca Civica, based in Madrid, are conducting due diligence with a view to a possible deal, the two lenders said in separate regulatory filings today. They are both also considering other mergers, and no final decision has been reached, they said.

Spain’s government is encouraging lenders into a second round of consolidation as it requires them to recognize deeper losses on real estate accumulated during the property crash. CaixaBank Chairman Isidro Faine expects a “wave of mergers,” he said on Jan. 27 as lenders seek to cut costs and boost scale in an economy where lending is shrinking at a record pace.

“The new regulation has opened up a window to consolidation in the banking industry,” Daragh Quinn, an analyst at Nomura International in Madrid, said in a phone interview today. “One of the smaller domestic banks that’s under pressure to make additional provisions for real estate is going to be looking at its options.”

Lenders have until the end of May to present their merger plans, according to the decree passed on Feb. 3. The law tightens rules on provisioning and gives banks that combine more time to recognize losses.

Civica, CaixaBank Rise

Shares in Banca Civica, rose as much as 5.6 percent to 2.45 euros after ABC newspaper reported the banks were close to a deal. The shares rose 3.3 percent at 1:10 p.m. in Madrid, while CaixaBank rose 0.6 percent. Shares in Bankia SA (BKIA), Spain’s third- biggest bank, fell as much as 4.6 percent as investors bet today’s news makes it less likely it’ll be taken over by CaixaBank, Nuria Alvarez, an analyst at Renta 4 Banco, said in a phone interview.

Acquiring Banca Civica would add a lender with 72 billion euros ($94 billion) of assets and 1,394 branches to CaixaBank’s 270 billion euros in assets and 5,196 branches.

Civica, a lender formed from the merger of four savings banks that last year raised 600 million euros in an initial public offering, has to make provisions of about 575 million euros because of the government’s order to banks to clean up their real estate. The bank is set to lose 456 million euros this year, according to estimates by Nomura.

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net; Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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