Troubled Spanish savings bank to be sold

MADRID - Spain’s central bank will sell troubled regional savings bank CajaSur to the highest bidder as quickly as possible, newspapers reported Sunday amid concerns about the country’s public finances.

By (AFP)

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Published: Sun 23 May 2010, 5:53 PM

Last updated: Mon 6 Apr 2015, 11:09 AM

The Bank of Spain took over the southern regional bank on Saturday, the second time it has been forced to intervene in the running of a bank since the 2008 economic crisis.

CajaSur, formerly controlled by the Roman Catholic Church and headed by a priest, “will be sold to the highest bidder”, El Mundo and El Pais newspapers reported.

The Bank of Spain was not available Sunday to comment.

“The intention is to move as quickly as possible,” El Mundo reported, citing informed sources.

The Bank of Spain met Saturday with banking advisor Nomura, which will scout for bids, it said.

Savings bank Unicaja, which has been negotiating a merger with CajaSur since December, would likely be the best bidder, the newspapers said.

The central bank’s Fund for Orderly Bank Reconstruction would as a first step inject at least 523 million euros (657 million dollars) into CajaSur to put it at a “legal minimum” in terms of financial stability, El Pais said.

El Mundo said “the final cost of stabilising this bank could be in the region of two billion euros”.

CajaSur was hit by a “voracious appetite for property and an expensive human resources policy”, and its rejection of an offer to merge with Unicaja, El Pais said.

The bank chalked up losses of 596 million euros en 2009 and 114 million in the first quarter of 2010. About half of its equity portfolio was concentrated in the property sector.

It was the central bank’s second bailout of this kind since it was forced in March 2009 to take over Caja Castilla de la Mancha, in Spain’s first major bank rescue in 16 years.

Spanish banks got off relatively lightly from the subprime mortgage crisis in 2008 as the country’s strict regulations meant they did not invest heavily in the high-risk loans that hurt financial institutions elsewhere.

But many, especially smaller unlisted saving banks like CajaSur, were badly hit by the collapse at the end of 2008 of the country’s once-booming property market, both through loans to developers and mortgages.

The rescue of the bank comes amid doubts over Spain’s ability to straighten its public finances with global financial markets concerned it will face a crisis over its public deficit similar to that in Greece.

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