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La Caixa under scrutiny

Thu 27th Jan 2011

Spanish savings bank La Caixa was reported to be meeting on later today to decide whether it should become a listed bank or recreate its banking activities into its quoted holding company, Criteria.

Shares in Criteria, who are also a significant shareholder in other Spanish Companies such as Repsol , were suspended following a report in Spain's 'Expansion' newspaper saying La Caixa was holding a board meeting to decide upon a course of action.

Spain's cajas have been under pressure from the government to find new capital urgently. Eariler this week they were given until September to raise capital through private investors, failing that the government has said they will be partially nationalised.

Such cajas account for around half of Spain's banking system and urgently require capital to remove the effects of bad loans, bankrupt debtors and falling property prices from their books.

Barclays Capital estimated that around 46 billion euros is required, rising to 92 billion in a severe downturn. The Bank of Spain put the banks exposure to the real estate and construction sector at 181 million euros as of June 2010.

Shares in Criteria were trading 3.2 % up before the suspension. Representatives of neither La Caixa or Criteria were available for comment.

Earlier this week Spain instructed banks and cajas to boost core capital ratios to a new minimum of 8 %, in an attempt to boost confidence in its banking system and surpress expectations of the need for a similar bailout as seen in other European countries.

Restructuring of Spain's cajas last year saw number plummet from 45 to 18 due to a number of mergers, however only a few of these have been thought of as able to float. La Caixa in particular is thought of as the most likely to make such a move and raise private capital through a listing, although Criteria has been seen as a possible vehicle for getting access to new funds without going through an initial public offering.

La Caixa has a loan book closely ressembling to that of Santander Spain's biggest bank, and its listed unit Banesto combined.

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