CatalunyaCaixa would need at least 1,500 million euros to reach the 10% of ‘core capital’

Barcelona (ACN).- CatalunyaCaixa is the second Catalan savings bank and the fourth biggest at Spanish level. In 2010, on the year of its creation out of the merger of three Catalan savings banks, it made 109.1 million euros. It is a discrete figure compared to the larger financial entities, and it is also a smaller figure than the total profit of the three merged banks in 2009. Concretely, it is 1.1% smaller. However, the 109.1 millions of profit take into account the merger and the derived operations, such as the sale of Abertis shares. Without the benefits from the merger, the savings bank would have won 76.6 million euros, which represents 30.6% less than the 2009 results of the separated savings banks. Last summer, the medium-sized Caixa Catalunya and the small-sized Caixa Tarragona and Caixa Manresa merged and created CatalunyaCaixa. The new Spanish law on savings banks, which is stricter than Basel III, will require savings banks to have 10% of ‘core capital’ by September 2011. Currently, CatalunyaCaixa has 6.9% and would need between 1,500 and 1,700 million euros to reach the minimum requirement. Since it is difficult to get this amount, the savings bank plans to follow one of the legal ways out: to turn into a regular bank.

In 2010, CatalunyaCaixa had a smaller profit than in 2009. Clear positive news is that, in the current times of economic crisis in Spain, the savings bank managed to maintain the payment arrears rate at 5.41%. Another positive result is that the savings bank ‘core capital’ increased by 1 point, from 5.9% to 6.9%. The savings bank reached this by selling its share in the oil company Repsol-YPF, among other operations. In addition, the bank won 125,000 clients (70% in Catalonia) despite reducing the bank branches by 25%. This reduction operation will be completed during the first semester of 2011.

1,500 – 1,700 million euros needed

According to CatalunyaCaixa, the savings bank would need between 1,500 and 1,700 to reach the required 10% of ‘core capital’. The Director General of the savings bank, Adolf Todó, stated that the entity could go to the financial markets or the Spanish Fund for Banking Restructuring (FROB) to get the capital. Todó also admitted that their ‘core capital’ is 6.9%, and not the 8% as the Spanish Savings Bank Association (CECA) had previously stated. To face this situation, the savings bank’s board plans to turn CatalunyaCaixa’s banking business into a regular bank, as it is easier to get capital and it would need less ‘core capital’. However, the formula to do this is still to be decided, as well as the juridical nature of CatalunyaCaixa’s.

Todó insisted that “they work with the hypothesis” to get between 1,500 and 1,700 million euros to reach the 10% of ‘core capital’ anyway. Todó explained that the savings bank is studying several options, such as opening the entry for new investors or getting resources from the FROB, which could lead to the entry of the Spanish State in the financial entity’s board. Goldman Sachs is currently analysing CatalunyaCaixa’s health and making a recommendation for its restructuring. With this information, the savings bank board will have more elements to work and would also have an accurate amount of the financial entity’s value.