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Banco Popular & Allianz form joint insurance group

Source: Reuters - Fri 25th Mar 2011

Banco Popular, Spain's third-largest listed bank, and German insurer Allianz are creating a joint insurance company to manage over 11 billion euros in assets .

Popular will book capital gains of 490 million euros from the deal which a spokesman said on Thursday will be used to strengthen its balance sheet.

Spanish banks have been under close scrutiny on concerns about potential capital shortfalls after the collapse of the propery sector, forcing groups to shore up assets.

Popular's agreement with Allianz, a long-time partner and shareholder, covers pensions and investment fund management as well as the insurance business.

A new company, Allianz Popular, in which Allianz will hold 60% and Popular the balance, will combine existing joint ventures in insurance and pensions with Popular's fund management operations.

"The new venture is positive, although it will have little significant impact on Popular's balance sheet in the short term," Renta 4 bank analyst Nuria Alvarez said.

BPI analysts flagged the capital gains from the deal, which will boost Popular's generic provisions cushion, which, as in the case of many Spanish banks, has been eroded over the past 18 months due to rising bad loans.

Popular shares were up 0.3% at 1020 GMT, with Allianz up 0.1%.

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