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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.

CatalunyaCaixa (CX) on Thursday confirmed the sale of its portfolio of high risk loans to US investment company Blackstone, consisting mainly of mortgages with a nominal value of €6.392 billion and provisions of €2.205 billion. The transaction involved the transfer of funds to a portfolio of asset-backed securities for an amount equal to its book value, €4.187 billion, with €3.615 billion supplied by Blackstone and Spain's public Fund for Orderly Bank Restructuring (FROB) providing the remaining 572 million. With this divestment, the CX solvency ratio stood at 14.9% and coverage stands at 81.6%. After this sale, the liquid assets of CX will reach €16.848 billion and the company is now ready to face its full privatisation, after it was nationalised in 2012.  In addition, Blackstone had already bought CX's real estate business in June in a €40 million operation.

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.

The Catalan bank was nationalised in 2012 and is going through an important restructuring process before being privatised again. Currently, the financial entity is owned by the FROB (Fund for Orderly Bank Restructuring), which is run by the Bank of Spain and the Spanish Government. The FROB has been delaying the auction to sell CatalunyaBanc and is now proposing to layoff 2,453 workers of the bank and its subsidiaries, according to trade unions. This would represent firing some 34% of its staff. The company is proposing a compensation of 20 days worth of salary per year worked for those it plans to layoff, following the labour market reform, with a maximum of the equivalent to 12 months salary being given. CatalunyaBanc ended the first half of 2013 with a net profit of €183 million, after having transferred part of its real estate toxic assets to the so-called “bad bank” SAREB.

On Wednesday it became known that the Catalan Banc Sabadell would acquire Banco Gallego from the Spanish Fund for Orderly Banking Restructuring (FROB). However, the details of the operation were still being discussed and no detailed information was disclosed. On Friday, it was stated that the FROB – owned by the Spanish Government and the Bank of Spain – will inject €245 million of public money into Banco Gallego. In exchange, Banc Sabadell will buy the financial entity for the symbolical price of 1 euro but will take care of all the potential future losses.

The offer, presented by Banc Sabadell, has won the tender for the acquisition of Banco Gallego, which was nationalised and owned by the Spanish Fund for Orderly Bank Restructuring (FROB). Banco Gallego was partially owned by Novagalicia Banco, the private bank resulting from Nova Caixa Galicia. The FROB has announced its decision although it also explained that the final details are still “being negotiated”. In the last year and a half, Banc Sabadell has bought the former Caja de Ahorros del Mediterráneo, the business activity of Caixa Penedès (part of Banco Mare Nostrum) and now Banco Gallego.

The Spanish Fund for Orderly Bank Restructuring (FROB), which is run by the Bank of Spain and the Spanish Government, has announced that it will re-start the auction proceedings to sell Catalunya Banc and Banc de València. The selling process was temporarily frozen on the 21st of June, so as to wait for a calmer financial environment. The FROB decided to put the auction on hold, in order to wait for the results of the two independent audits on Spain’s banking system made by Oliver Wyman and Roland Berger. In June, Catalunya Banc’s auction was only pending the final offers by six financial entities to be completed. In September 2011, the FROB took control of Catalunya Banc, which de facto was nationalised.

However, CatalunyaBanc would need a maximum of €10.83 billion in the most stressed scenario. According to the independent audit by Oliver Wyman, with KPGM, Deloitte, PwC and Ernst & Young, the Spanish banking system would need a maximum of €53.75 billion in the worst case scenario. 4 banking groups would concentrate 86% of these additional funds. In total, 7 banking groups would need additional funds, while 7 groups would be strong enough, with their own resources, to resist a hypothetical scenario with a 6.5% recession between 2012 and 2014, 27% unemployment, a 85% drop in land prices and a 55% decrease in housing prices.

According to the Bank of Spain’s Deputy Governor, the Catalan bank would need an additional amount of €4.5 billion to meet the capital requirements of the last decree approved by the Spanish Government. Before this announcement, the Spanish State had already allocated €2.97 billion to rescue CatalunyaCaixa. Novagalicia would also need €4.5 billion. Combined, these €9 billion are to be added to the €19 billion for Bankia. The Spanish Government refuses to give the total figure required by the entire banking system, as it waits for the independent audit’s results. However, the IMF leaked that Spanish banks might need €40 billion.

The bank created from Catalan savings bank CatalunyaCaixa is expected to be sold within the next two months. CatalunyaCaixa was intervened by the Bank of Spain last September 30th, as it could not reach the required core capital. The Spanish Fund for Orderly Bank Restructuring (FROB), owned by the Spanish State, currently owns 89.74% of CatalunyaBanc. The FROB has decided to disinvest in the Catalan bank, which starts a competition process that will sell 100% of CatalunyaBanc’s shares.

A Barcelona-based newspaper announced in its Tuesday edition that the two Catalan savings banks would see a state intervention and would be nationalised by the Spanish Government and the Bank of Spain this summer. CatalunyaCaixa has denied the claims. Unnim also denied the rumours and reminded the press of the 30th September deadline set by the Bank of Spain to restructure its business and find additional capital.

The board of the Catalan savings bank decided to “temporarily” use public capital in order to meet the new requirements in the sector. This move means it will reach 10.4% of ‘core capital’. Private capital is expected to increase its share “in the medium-term”.