CaixaBank buys Barclays' Spanish unit for €800 million, with estimated restructuring costs of €300 million

Barcelona (ACN).- Catalonia's largest financial group, Caixabank, has come to an agreement with Barclays Bank PLC to buy the Spanish section of its banking business, Barclays Bank SAU, for €800 million, according to a statement released on Sunday. The purchase includes 550,000 new customers, a network of 270 branches and nearly 2,400 employees, which strengthens CaixaBank's leadership within the Spanish market. The agreement excludes, however, 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. Following this operation, the restructuring process will cost CaixaBank an estimated €300 million. However, the elimination of duplications is expected to save the Catalan financial group a total of €70 billion gross in 2015, €80 billion in 2016 and €150 million a year from then on, according to internal calculations.

Caixabank reported this information in a note to the Spanish Stock Market Authority (CNMV), which also included details of the €800 million acquisition. It also stated it would be closed between December 2015 and January 2016.

The purchase included 100% of the business of retail banking, wealth management and corporate banking business of Barclays Bank in Spain. With the acquisition CaixaBank will incorporate 550,000 new customers, 270 offices and nearly 2,400 new employees.

In a statement, the President of CaixaBank, Isidre Fainé, said that the acquisition "will provide a professional, highly skilled team focused on providing a high quality service to its customers". "With the merging of the two organisations, the clients of Barclay's Bank and 'La Caixa' will be given the best service and a wide range of products" he added.

Gonzalo Gortázar, CEO of CaixaBank, agreed, saying that "this acquisition will enable us to enhance our personal banking and private banking businesses in Spain, strengthening our counselling offer to our customers". He continued, "CaixaBank has experience in consolidating entities with high private and personal banking", citing the integration of the Morgan Stanley's private banking business in Spain in 2008, and, more recently Banca Cívica and Banco de Valencia.

Part of Barclays "strategy update"

When commenting on the transaction, Anthony Jenkins, CEO of the Barclay's Group, recalled the announcement in May of a "Barclays strategy update" creating the "Barclays Non-Core cluster", which included the retail banking business in Spain. He stated that "we were clear that this business, whilst not the central aspect to Barclay's strategy, but could be attractive to another owner". "With CaixaBank these businesses have a greater opportunity to grow and thrive" he concluded.

Barclays currently operates in over 50 countries and employs approximately 135,000 people. The society of Barclays Bank SAU currently has assets worth €21,600 million. In June this year it registered €18,400 in net loans, €9,900 million in customer deposits and €4,900 billion worth of assets under management. The financial institution has a default rate below the industry average and an increased solvency rate, confirming the high quality of its assets and its good management, according to CaixaBank's press release.

Profits promised for La Caixa despite restructuring costs

The restructuring of Caixabank following the acquisition is estimated to cost a total of €300 million. However, the elimination of duplicate branches and redundancies is expected to save the Catalan banking group a total of €70 billion gross in 2015, €80 billion in 2016 and €150 million a year from then on.

For shareholders, the forecasts are also positive, and it is expected that they will profit from this transaction from the first year and can will earn a return on invested capital (ROIC) of 10% from 2016. 

CaixaBank is Catalonia's largest financial services company and currently has 13.6 million customers, a network of 5,695 branches and 31,574 employees. With these figures, the Catalan bank leads Spain's banking market, ahead of the world giants Santander and BBVA, which have a smaller market share in this European country.