Bank of Spain takes over Banco de Valencia

 

The Bank of Spain said on Monday it had taken over Banco de Valencia, making it the latest casualty of the collapse in Spain's property boom and the first retail bank to seek a bailout.

The state-backed bank restructuring FROB fund will bolster Banco de Valencia's capital by 1 billion euros and grant a 2 billion euros credit line, the Bank of Spain said in a statement. The central bank said it would then aim to sell off Banco de Valencia at auction.

At the end of June, Banco de Valencia had a core capital ratio of 7.36 percent, while bad loans were up to 6.99% of the total from 6.33% at the end of March.

Since the start of Spain's financial crisis, the central bank has taken control of three savings banks - CCM, Cajasur and Caja de Ahorros del Mediterraneo (CAM), which is due to be sold off in auction by mid-December.

Sources close to the CAM deal have said, however, that bidders are trying to negotiate a guarantee for CAM's debt obligations with the central bank.

Bidders are due to present binding offers by Nov. 24 or 25.

Three other savings banks have also requested FROB funds to meet the Bank of Spain's tough new capital requirements, which oblige listed banks to have an 8% core Tier 1 capital ratio and those without any significant private investment to reach 10%.

Earlier this month, Banco de Valencia said it had shareholder approval to hike capital by up to 50%, or about 200 million euros, if required after El Mundo newspaper said it had a funding gap of about 600 million euros.

Banco de Valencia is part of Spain's Banco Financiero y de Ahorros (BFA) which is the parent of listed savings bank Bankia.

Like most of Spain's banks, Banco de Valencia's balance sheet has been hit by its exposure to soured loans to property developers after the country's property market bubble burst in 2007.

A large part of the bank's operations are based in Spain's eastern Levante region, which is among the worst hit by the real estate crisis.

Banco de Valencia shares were down 3.3% at 0.74 euros each when the CNMV regulator suspending trading shortly before the Bank of Spain announced it had intervened.