The Forming Of Spain's Largest Bank

On MarketWatch: Caja Madrid, Bancaja start merger process

• MADRID (MarketWatch) -- The boards of Caja Madrid and Bancaja said Thursday they've begun a process to merge operations that would create Spain's biggest savings bank.
  
  According to a statement, the country's second-biggest and third-biggest savings banks are also negotiating to merge with five smaller savings banks: Caja Insular de Canarias, Caixa Laietana, Caja Segovia, Caja Rioja and Caja Avila
  
  Caja Madrid and Bancaja said the deal would create an entity with around 340 billion euros [$411.6 billion] in assets.
  
  The president of the combined firm will be named from Caja Madrid, and the executive vice president from Bancaja. The banks intend to pool their earnings and back up each other's solvency, creating a bank that would be the largest commercial and business lender in the country.
  
  Caja Madrid's president is Rodrigo Rato, the former highly respected Spanish economy minister between 1996 and 2004.
  
  The seven-way tie-up of banks is likely to be considered a major push in the direction the government and the Bank of Spain has been urging with regards to consolidation.
  Barbara Kollmeyer is an editor for MarketWatch in Madrid.

ps: On that MarketWatch article, there's a clip of Trichet called 'Never Feared For Euro Survival"

• 
  Trichet: ECB never feared for euro survival
  European Central Bank President Jean-Claude Trichet told reporters the bank's buying of euro-zone government bonds in May was aimed at ensuring markets were functioning the way they were supposed to and that there was no fear the euro would collapse
  

Here's another version: Caja Madrid, Bancaja merger forms Spain's biggest bank

• Caja Madrid, Bancaja merger forms Spain's biggest bank
  
  2010-06-11 06:30:00
  
  Spanish savings banks Caja Madrid and Bancaja Thursday announced that they were merging to create the country's biggest savings bank.
  
  The boards of the two banks approved the merger. The new company will also include five smaller savings banks, with which Caja Madrid had agreed to join operations.
  
  The merged entity was to have total assets of about 340 billion euros ($408 billion).
  
  Caja Madrid Chairman Rodrigo Rato, a former head of the International Monetary Fund, was expected to chair the new entity, which will allow the participating banks to retain their brands and legal structures.
  
  Caja Madrid is currently Spain's second-largest savings bank, after La Caixa, while Valencia-based Bancaja ranks fourth.
  
  Spanish savings banks have speeded up merger plans in order to be able to get financial support from the bank restructuring fund FROB. About a half of the country's 45 savings banks are carrying out or discussing mergers.
  
  Meanwhile, Banco Sabadell and Banco Guipuzcoano were negotiating what could become the first merger among middle-level banks during the current banking restructuration process, sources close to the talks said. There was no official confirmation from either bank.
  International analysts have urged Spain to restructure its banking sector as part of attempts to revive its sluggish economy.

Sounds like good news eh?

Massive Merger and Acquisition Deal in Spain.

But I am shocked to that MarketWatch, ie its Spain editor in Spain, Barbara Kollmeyer, did not quote back what it wrote on 1st June on Caja Madrid regarding its cry for bailout to the tune of 3 billion euros on the back of downgrades by S&P and Fitch!

On 1st June: Caja Madrid said to ask for 3 billion euros of support

• A string of downgrades hit the caja sector from S&P and Fitch
  
  By Barbara Kollmeyer, MarketWatch
  
  MADRID (MarketWatch) -- The stream of negative news from Spain's savings bank sector continued on Tuesday, with a report that the second largest player, Caja Madrid, will tap the government for 3 billion euros ($3.6 billion) of rescue funds.
  
  A spokesperson for Caja Madrid said the report that appeared in several Spanish newspapers saying it will ask for funds from the government's rescue fund was "speculation."
  
  The savings bank said last Friday it was in talks to merge with several regional cajas -- Caja de Avila, Caja Insular de Canarias, Caixa Laietana, Caja Segovia and Caja Rioja.
  
  More bad news emerged for Caja Madrid when Standard & Poor's placed its A/A-1 long and short-term ratings on the savings bank on CreditWatch negative, saying it expects "pronounced pressure" on its operating profit this year and into 2011.
  
  The negative status reflects the possibility of lowering counterparty credit ratings on Caja Madrid, though S&P said any downgrade is unlikely to exceed one notch. It's standalone credit profile and its hybrid securities could suffer a downgrade by one or more notches, warned the ratings agency.
  
  S&P said Caja Madrid, Spain's fourth-largest banking group by total assets, will be closely monitored over the next 18 months to evaluate the magnitude of expected deterioration.
  
  Downgraded on Tuesday was Spanish bank Banco Sabadell, the nation's sixth-largest group by total assets.
  
  Fitch Ratings, who downgraded Spanish sovereign debt last Friday, cut its long-term debt rating on Sabadell to A from A+.
  
  Fitch also downgraded Caja de Ahorros del Mediterraneo's long-term debt to BBB+ from A- with a negative outlook, and Banco de Valencia and Bancaja each to BBB from BBB+ with stable outlooks.
  
  Caja de Ahorros del Mediterraneo is Spain's only publicly traded savings bank. Those shares /quotes/comstock/06x!ccam (ES:CAM 5.83, +0.03, +0.52%) were down 0.2% in Madrid.
  
  It wasn't all bad for Sabadell, whose shares were down 3.6% amid weaker Spanish and European markets overall from nearly the start of trading.
  
  Fitch praised its "good domestic retail franchise, particularly with small to medium-sized enterprises, as well as its track record of sound pre-impairment operating profit, good cost efficiency and an improvement in regulatory capital." ( read rest here )

On ZH: Largest Spanish Savings Bank Combination Of Caja Madrid And Bancaja To Request €4.5 Billion In Aid

• Earlier today we pointed out that Spanish cajas Caja Madrid and Bancaja were merging in the latest Spanish rescue combination, involving 5 other smaller banks. Reuters is now reporting that this brand new combination, which incidentally is the now the biggest Spanish pro forma saving bank, has requested €4.4-4.5 billion in aid from the Spanish restructuring fund. Spain has now essentially one upped the US: instead of using an FDIC-like intermediation to give "deep value" investors a nice discount on acquired assets courtesy of taxpayers, the banks in Spain are directly going to the taxpayer trough as soon as two horrible balance sheets combined, and the result is an even bigger monstrosity. But that's ok, Spain found some other European banks to sell sovereign debt to earlier today, knowing full well that the ramifications of a regional failed bond auction would also take down all of Europe. The ponzi valiantly marches on. After all it's only the ECB's electronic ones an zeroes that are at risk.

Here's an old posting (dated 2008) by Yves: Under-the-Radar Rescue of Spanish Mortgage Banks