Spanish Lenders Led by Banco Santander Buy Into Bad Bank

Banco Santander SA, CaixaBank SA and Banco Sabadell SA are among five “main investors” in the so-called bad bank set up by Spain to purge soured real estate from the books of lenders that take state aid.

The others are Banco Popular Espanol SA and Kutxabank, Spain’s bank rescue fund FROB said in a statement today. More banks and a group of insurers will invest when the vehicle, known as Sareb, issues more shares and subordinated debt this month, FROB said. Santander will invest as much as 840 million euros ($1.1 billion), equivalent to a 16 percent stake, Spain’s biggest lender said in a filing.

Spain is creating the 60 billion-euro facility to help lenders such as the Bankia group that have received state aid to jettison real estate assets that turned sour during the country’s property crash. The creation of Sareb, is a condition of Europe’s bailout for Spain’s banking industry agreed in July.

“There has been a wide response from Spanish banking institutions and insurers,” Economy Minister Luis de Guindos told reporters in Brussels today. “We will have a significant number of investors, foreign and domestic alike, in this project.”

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, isn’t on the list of main partners. Axa SA, France’s largest insurer, is putting in 10 million euros through its Spanish unit and is the only foreign investor so far to say it’s backing the bad bank.

Stake Capped

The government is keeping its stake in Sareb below 50 percent to avoid having to include it in national accounts. The aim is for Sareb to operate for as long as 15 years and yield an annual return of as much as 15 percent, Fernando Restoy, chairman of FROB, said Oct. 30.

“A lot of questions are going to be asked about which investors are going into this and what they hope to get out of it,” said Simon Maughan, a financial industry strategist at Olivetree Securities in London in a telephone interview. The government’s strategy of mixing private and state capital in Sareb may undermine confidence in it, he said.

Contributions to Sareb include 397 million euros from FROB, 164 million euros from Santander, 118 million euros from CaixaBank, 66 million euros from Sabadell, 57 million euros from Popular and 25 million euros from Kutxabank, FROB said. The initial 827 million-euro amount provided by FROB and the five main investor banks plus contributions due in coming days will cover about 75 percent of Sareb’s equity, FROB said.

“Yesterday was a first step with only five investors, but there will be capital increases in the future,” de Guindos said. Investors will back the vehicle with 1 billion euros of capital and 3 billion euros of subordinated debt, he said.

Sareb will have about 90,000 homes on its books within two years, Antonio Carrascosa, FROB’s director general, said Nov. 27. The bad bank will complete the purchase of 44 billion euros of assets from nationalized lenders by the end of December, FROB said today.

Below is a list of the commitments made so far by Sareb investors and the stakes they will take in it:

* Santander: 840 million euros; 16 percent * CaixaBank: 606 million euros; 11.7 percent * Sabadell: 335 million euros; (stake not specified) * Popular: 288 million euros; 6.89 percent * Kutxabank: 128 million euros; (stake not specified) * Axa Espana: 10 million euros; (stake not specified)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE