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Caja Sol & Banca Civica To Merge

Source: Dow Jones - Fri 12th Nov 2010

Spain's savings banks Banca Civica and CajaSol, currently in merger talks, plan to ask for between EUR500 million and EUR1 billion in aid from a special government fund, three people close to the situation said Friday.

Banca Civica was one of five Spanish "cajas" that failed the European Union stress tests conducted in July. It signed a deal in July with U.S. investment fund J.C. Flowers, seeking a EUR450 million capital injection, but the funding has been delayed and Banca Civica needs fresh capital soon, the sources said.

The merger deal between Banca Civica and CajaSur - which would result in a combined entity with EUR76 billion worth of assets - will likely get approval from the Bank of Spain, one of these people said, since it fulfills the criteria set up by the central bank as it looks to strengthen Spain's shaky cajas, which account for around half of the country's financial sector.

Spokespeople for both cajas and the central bank declined to comment.

Banca Civica itself is the result of an earlier merger of Caja Navarra, Caja Canarias and Caja Burgos under a specialframework set up by the Bank of Spain to speed up caja mergers. CajaSol also recently merged with smaller rival Caja Guadalajara.

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