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Spain's Caixabank targets expansion at home

Source: Reuters - Fri 13th May 2011

Shareholders at Spain's Criteria yesterday approved the transformation of parent La Caixa into a listed bank, marking an important milestone in the restructuring of the country's struggling 'cajas' savings banks.

Madrid has forced its banks to shore up their capital levels to reassure global markets over the stability of its financial system. One of the options for boosting capital ratios is for the 'cajas' to seek a stock market listing.

Caixabank will float on July 1 and is expected to be followed by Bankia, Spain's biggest savings bank by assets, formed from the merger of seven savings banks led by heavyweight Caja Madrid.

With a market capitalisation of some 20 billion euros, Caixabank plans to grow its market share in Spain organically as well as through acquisitions, while also eyeing further overseas expansion.

"We are going to increase market share organically and non-organically by 50% in Spain, and slowly increase our exposure in Asia, America and Eastern Europe," Criteria's chairman Isidro Faine told shareholders on Thursday.

CaixaBank, which is 81% owned by La Caixa, will take over management of its stakes in Austria's Erste Group Bank, China's Bank of East Asia and Mexico's Inbursa.

Mexican tycoon Carlos Slim has already backed the Caixabank listing by buying shares worth more than 5 million euros in Criteria.


Criteria shareholders also approved a 1.5 billion-euro convertible bond issue, due to be launched next week, to boost capital reserves at the newly-formed bank.

The bond was announced in January as part of the listing operation and will raise the Tier 1 core capital solvency ratio of Caixabank to 10.9%, well above tough new government minimum levels.

La Caixa also moved toxic real estate assets worth some 4 billion euros into another entity called Servihabitat.

Spain's savings banks, which make up about 50 percent of the financial system, have been most exposed to the sickly property market.

With the aim of strengthening its capital base, Servihabitat will make a 1.4 billion euro share issue to which La Caixa will fully subscribe, Criteria's chief executive Gonzalo Gortazar told shareholders.

Caixabank's banking business has a book value of 9.5 billion euros, but the new bank also manages La Caixa's stakes in Repsol, Telefonica and its insurance business in Spain which, combined with its foreign bank stakes, brings the book value to 20.3 billion euros.

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