bank merger

New bank will have nearly 20 million clients, €623.8 billion in assets and market capitalization of over €20.5 billion

The Spanish banking giant BBVA, which purchased Catalunya Banc last July, is now proposing to shut down 400 branches of the acquired bank and reduce its staff by 2,000 employees (out of a total of 4,400 currently employed), according to trade union sources. At the end of April, the BBVA announced it would close 285 Catalunya Banc branches and reduce the staff by about 1,700 people. However, this Wednesday the Spanish bank has released higher figures and with this action is kicking off the official negotiation period with trade unions before it registers a mass layoff. The adjustment is to start already this year and would be completed by 2017, with the main part of it taking place during 2016. In theory it should only affect the branches that originally belonged to Catalunya Banc (CX) and the employees who were originally working for the former Catalan savings bank, and not those of the BBVA working in Catalonia. In April, Angel Cano, who is the CEO of the Spanish bank, stated that the adjustment would take place within the new integrated structure, not only in regard to the former CX branches and staff.

Last April, Banc Sabadell filed a takeover offer on 100% of the shares of the UK lender TSB, partially owned by LLoyds. On Monday, the Catalan bank announced it had already exceeded the 75% minimum bid of the takeover offer, reaching 81.23% of TSB shares. However, this percentage is still likely to increase in the upcoming days, since there are 14 remaining days till the end of the takeover's acceptance period. In order to fund the transaction, the Catalan corporation will carry out a €1.61 billion capital increase (€1,607 million). Current shareholders have a preference call in this capital increase. Banc Sabadell, is one of the few banks to emerge stronger from a financial crisis that has redrawn Spain’s banking sector. Unlike many of its Spanish rivals, the bank is in good shape reporting a 50% increase in annual profits at the end of 2014 to €371.7 million. Since 2007, it has doubled in size and is now Spain’s 5^th largest bank. It achieved this mainly through an energetic programme of acquisitions in Spain and abroad. 

BBVA CEO, Angel Cano, announced on Wednesday a 3-year plan to restructure the bank's presence in Catalonia after the integration of the previously nationally-owned Catalunya Banc, which was purchased last July. The bank's 'number 2' explained they will shut down 285 branches of their network in Catalonia and lay off 1,700 employees, which is 20% of the local workforce including Catalunya Banc's staff. At the end of 2014, BBVA had 639 branches of its own in Catalonia and was working on integrating the 728 branches from the recently-purchased entity. According to the new plan, 150 branches from Catalunya Banc will be closed. According to Cano, the acquisition of the Catalan bank will start bringing positive figures to the Group’s results by 2016.  Furthermore, it is strategic, since the bank will roughly double its presence in Catalonia and will add 1.5 million clients, becoming Catalonia’s second-largest financial entity.

Last week, TSB announced Banc Sabadell's interest in purchasing all of the shares of the British bank, which is partially owned by Lloyd's. The board of the 6^th largest bank in the United Kingdom then said they would welcome the Catalan bank's takeover bid, which they set at £3.40 per share (equivalent to €4.80). This meant that Banc Sabadell would buy TSB for £1.7 billion, or €2.4 billion. At that time, the Catalan bank denied any definitive agreement had been reached and simply confirmed that there were some talks in progress. A week later, Banc Sabadell has finally announced and approved the takeover bid, on the same terms released last week. In order to fund the transaction, the Catalan corporation will carry out a €1.6 billion increase in capital. This purchase will significantly strengthen Banc Sabadell's internationalisation, dramatically increasing its presence in the UK and in London's financial circles.

TSB, which is the seventh-largest bank in the United Kingdom, confirmed on Wednesday that they have received a preliminary takeover bid of £1.7 billion (equivalent to €2.35 billion) filed by Banc Sabadell. The Catalan bank would have offered £3.40 per share (€4.80) and would be ready to buy the entire British financial entity, 50% of which is still owned by Lloyds. Sources from Sabadell have confirmed takeover talks, but they stressed that they are still preliminary in nature. After the news was released, shares of TSB increased by 26.4% while those of Banc Sabadell dropped by 7.5%, causing the Spanish Stock Exchange Authority (CNMV) to temporarily suspend trading in the Catalan bank. When Banc Sabadell returned on the stock market, its shares continued to decrease, dropping by 10.5%, but they partially recovered and ended the day with a 6.6% loss.

Barcelona-based Caixabank has come to an agreement with Barclays Bank PLC to buy Barclays Bank SAU for €800 million. The purchase of Spain's banking business of the UK company includes 550,000 new customers, a network of 270 branches and nearly 2,400 employees. However, the agreement excludes Barclay's Spanish investment banking business and Barclaycard, which will remain in the hands of the British entity. It is expected that the transaction will become effective later this year. The restructuring process following this acquisition will cost CaixaBank an estimated €300 million. However, the elimination of duplications is expected to save the Catalan bank €70 billion gross in 2015, €80 billion in 2016 and €150 million a year from then on.

BBVA will pay €1.187 billion to the Fund for Orderly Bank Restructuring (FROB) for the nationalised Catalan bank, beating the other two offers in the final phase of the auction process presented by Santander and Barcelona-based CaixaBank. This means that Spanish taxpayers will lose €11.84 billion considering guarantees and due to the fact that the Spanish Government injected €12.622 billion into Catalunya Banc since it was nationalised in 2011. Catalunya Banc was a private bank owned by CatalunyaCaixa, the merger of three historical Catalan savings banks (Catalunya, Tarragona and Manresa). It could not face the deep restructuring process required to meet the new banking regulations. The bank had a weak financial position resulting from a high exposition to toxic real estate and mortgages assets, as well as suffering from poor management. The BBVA will become the second largest bank operating in Catalonia, doubling its past position.

Sabadell United Bank, the US subsidiary of Catalan Banc Sabadell, has strengthened its position in Florida, purchasing JGB Bank of Miami for 49.6 million dollars (€36.45 million). The Catalan company, chaired by Josep Oliu, has informed the Spanish Spanish Stock Market Authority (CNMV) about this operation on Monday. With the integration of JGB Bank, Sabadell United will become a benchmark in the U.S. state of Florida with a total of 40,000 clients, a turnover of close to 8,000 million dollars (€5,876 million) and 27 branches. The operation began in December and now, in July, the bank has received the necessary authorisation from regulatory bodies within schedule.

The Barcelona-based bank, which was totally nationalised in December 2012 and received a €9.08 billion bailout, has made profits of €532.2 million in 2013, which would represent €167.8 million without the extraordinary profits. In 2012, CatalunyaCaixa posted losses of €11.86 billion. In 2013, the operational costs were reduced by 13.1%, having drastically reduced the number of employees and branches. The bank's capital ratio is now 14.36% and the main capital following Basel III criteria reached 12.3%, which represents liquidity of €15.01 billion. With these figures, the Spanish Government is in a better position to sell CatalunyaCaixa, which forecasts profits also for 2014. This company was the result of merging the banking business of 3 savings banks in 2011: Caixa Catalunya, Caixa Tarragona and Caixa Manresa, which disappeared after a long tradition of social work. The operation was part of Spain's restructuring of the banking sector.

Barcelona-based CaixaBank, Spain’s largest bank, has earned €503 million in 2013, representing a 118 % increase on 2012. The private bank mostly owned by La Caixa has left behind a 4-year-long downward trend in profits which can be traced back to December 2009, towards the start of the economic crisis. This result was successfully reached by trying to maintain a similar provision volume than in 2012, which resulted in consuming €7.5 billion, meaning 4.81 % less than what was spent last year. The integration of Banca Cívica and Banc de València have contributed to a growth of the market share to 27.4 %. The bank’s core capital, which is the main solvency indicator, stood at 12.9% according to Basel II regulations and at 11.7% according to Basel III regulations.

Banc Sabadell, the second largest banking company in Catalonia, has ended 2013 with a net profit of €247.8 million, three times more than in 2012, after consuming €1,736.6 million in provisions and allowances for non-payments of loans, impairment of property and other financial operations. Due to the new regulations of the Bank of Spain on credit repayment and the acquisitions of other banking companies, the percentage of delayed or unpaid loans has climbed to 13.63%, 46% more than in 2012. Without the refunding operations, it would have been fixed at 11.13 %. The bank’s core capital, which is the main solvency indicator, stood at 12% and, with the new Basel III, it was set at 10.1%. Jaume Guardiola, CEO of Sabadell, believes that this trend can be the “turning point” of a crisis that was first anticipated when the results for 2012 were announced.

Banc Sabadell has managed to integrate the entire network of Caixa Penedès’ branches in Catalonia and Aragón, as well as all the technological and operational platforms. With this last integration, Banc Sabadell has €170 billion in assets, around 6 million clients and 12% of Spain’s banking branches. This means that the Catalan bank is now the 4^th largest retail financial entity in Spain, after the Barcelona-based CaixaBank, Santander and BBVA. Banc Sabadell bought Caixa Penedès’ banking business in Catalonia and Aragón to Banco Mare Nostrum (BNM) in May. In only 5 months, Banc Sabadell has added 376 branches to its network, along with 545 million client registers and 900,000 clients. In the last year, the Catalan bank has doubled the size of its network, since it also integrated the Caja de Ahorros del Mediterráneo (CAM) network.