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Criteria Shares Surge on La Caixa’s Plan to Make It a Bank

Criteria CaixaCorp SA shares surged after its majority owner, La Caixa, said it will transfer its banking business to Criteria to comply with new regulations and raise capital.

The shares in the Barcelona-based investment holding company jumped 16 percent to trade at 5.16 euros at 1:30 p.m. in Madrid today.

La Caixa will swap its banking business for Criteria’s stakes in Gas Natural SDG SA, Abertis Infraestructuras SA and three other companies, the lender said in a statement yesterday. Criteria will become CaixaBank, and the new lender will issue 1.5 billion euros ($2.1 billion) of convertible bonds, which will likely boost core capital to 10.9 percent, the lender said.

“It’s very difficult to tap the market with an institution like a caja,” Chairman Isidro Faine said at a press conference in Barcelona today. “That’s why we set up Criteria.”

The Spanish savings bank reported 2010 recurring net income fell 12 percent to 1.5 billion euros in a regulatory filing today. The lender had a bad-loan ratio of 3.71 percent and core capital of 8.6 percent, it said.

“This was the year in which the crisis materialized,” Chief Executive Officer Juan Maria Nin said at the same event. “In certain moments the management of the balance sheet was more important” than boosting profit, he said.

Criteria will keep its current stakes in Telefonica SA and Repsol YPF SA as well as in insurers, investment managers and foreign financial institutions, it said. La Caixa will own 81 percent of the new bank.

Government Plans

There are no plans “on the table” to acquire other savings banks as part of the restructuring, Faine said.

Spain’s government wants savings banks to raise private capital to address investor concerns about the health of the banking system. Spanish Finance Minister Elena Salgado said this week that Spanish lenders that aren’t publicly traded and depend on wholesale debt markets will need core capital levels of as much as 10 percent.

In laying out the new rules, Salgado said recapitalizing the industry won’t cost more than 20 billion euros and “all or part” of that will come from financial markets.

Lenders have until the end of September to meet the new requirements and if they fail to do so, they will have to tap the state rescue fund known as FROB, and cede shares with voting rights in exchange. FROB has already committed 11.6 billion euros to back savings-bank mergers, equivalent to about 1 percent of the nation’s gross domestic product. La Caixa hasn’t sought support from FROB.

‘Right to Separate’

Criteria shareholders who don’t back the reorganization have the “right to separate,” the bank said in the statement.

Under the terms of the deal, La Caixa will give Criteria all its shares in its Microbank unit, with a value of 9.5 billion euros. In exchange, La Caixa will receive some of Criteria’s holdings and Criteria shares worth 2 billion euros.

“The deal has been done at a very attractive price for Criteria shareholders,” said Nuria Alvarez, an analyst at Renta 4 SA brokerage in Madrid. “The bank that will be created will be at an advantage compared to the other mid-sized domestic lenders.”

Shifting the banking assets to the holding company would open up new avenues of raising capital, even though its solvency levels are already strong, Cesar Molinas, an independent consultant and former head of European fixed-income strategy at Merrill Lynch & Co., said in a phone interview before the final details were announced.

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