Spanish savings bank La Caixa reported 2010 recurring net income fell 12 percent as it announced plans to transfer its banking business to a listed subsidiary to comply with new regulatory rules.
Spain’s largest savings bank had a bad-loan ratio of 3.71 percent and core capital of 8.6 percent, it said in a regulatory filing today. Recurring net income declined to 1.5 billion euros ($2.1 billion).
La Caixa will transfer its banking business to Criteria CaixaCorp SA as it seeks to comply with new rules announced this week, the lender said in a statement yesterday. Criteria will become CaixaBank, and the new lender will issue 1.5 billion euros of convertible bonds, which will likely boost core capital to 10.9 percent, the lender said.
“This was the year in which the crisis materialized,” Chief Executive Officer Juan Maria Nin said at a press conference in Barcelona today. “In certain moments the management of the balance sheet was more important” than boosting profit, he said.
In exchange for handing its banking business to Criteria, La Caixa will receive Criteria’s shares in Gas Natural SDG SA, Abertis Infraestructuras SA, Sociedad General de Aguas de Barcelona SA and two other companies, the Barcelona-based group said in a regulatory filing. La Caixa will own 81 percent of CaixaBank.
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.
‘Right to Separate’
Criteria shareholders who don’t back the reorganization plan will have the “right to separate,” the lender said in the statement. 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.
Under the terms of the deal, La Caixa will give Criteria all its shares in its fully owned unit Microbank, with a value of 9.48 billion euros. In exchange, La Caixa will receive some of Criteria’s holdings and shares in Criteria worth 2 billion euros.
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.