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BoS agrees CAM sale

Thu 8th Dec 2011

The Bank of Spain has agreed to sell the recently nationalised CAM Bank to Banco de Sabadell, in a deal that has been greatly subsidised by the State, and will move Sabadell up to the country's fifth-largest lender.

As the new owners of Caja de Ahorros del Mediterráneo, Banco Sabadell will be given guarantees by the Bank of Spain that will cover 80% of losses attached to the caja's huge portfolio of real-estate loans and foreclosed properties over the last decade.

Earlier this year Spain's Fund for Orderly Bank Restructuring (FROB) injected €2.8 billion of capital into the Bank to enable it to pass the last round of EU stress tests, and later extended a €3.0 billion line of credit to the Bank. These measures effectively 'sold' the troubled cajas to the central bank. A further injection of €2.45 billion of capital is due to made in order to make the caja attractive for sale - when it will then be sold to Sabadell for just 1 Euro.

Last week the government approved a decree that will make banks pay an increased deposit insurance premium, ruling that the banks themselves should contribute more to the restructuring of the country's financial sector. It plans for banks to contribute up to €1.6 billion per year into the FROB fund.

The sale of CAM will now double Sabadell's balance sheet, and bring the bank and additional 5 Million customers, based largely in the Mediterranean regions of Valenica and Murcia. This acquisition will benefit the buyer, as Alicante-based CAM had a significant market share in these area, whilst Sabadell currently has a comparatively low presence here.

Sabadell, which already has €95 billion in assets, had been seeking opportunities for growth for some time and to move away from it's regional roots anf become a truly national player in the banking arena. Now, it will absorb €71 billion of CAM's assets and overtakes its main rival, Banco Popular Espanol SA, in size.

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