Spain’s Shrinking Bank Network Leaves CaixaBank Top-Heavy

CaixaBank SA is among lenders that look increasingly bloated as Spain’s economic slump adds pressure on banks to cut branches after the busted credit boom.

CaixaBank has 6,631 branches to serve its 13.2 million customers, or one branch per 1,991 clients. That compares with 3,093 clients for each of the 4,752 Spanish branches run by Banco Santander SA, the country’s biggest lender, and 3,215 customers at Banco Popular Espanol SA.

An economic crisis afflicting Spain follows a decade-long credit boom that saw the number of bank branches surge to the highest per capita in Europe. While lenders including Bankia and Santander have announced plans to close more than 2,000 branches in an economy already grappling with a recession and the region’s highest jobless rate, banks may have to shrink further.

“Spain has this problem that it is excessively banked,” said Alvaro Cuervo, director of the University College of Financial Studies in Madrid. “It’s not over.”

After integrating Banca Civica in 2012, CaixaBank is conducting a “gradual process” of adjusting its branch network and doesn’t plan job cuts as a result, the lender said in an e-mailed statement. The Barcelona-based lender “has a business model based on a commercial network that’s close to the client, which explains why the company has the most extensive branch network in the Spanish market,” it said.

Union Protests

CaixaBank shares fell 5.5 percent to close at 2.98 euros in Madrid. They have gained 12.8 percent this year.

Spain’s Comisiones Obreras called protests in seven Spanish cities late yesterday as talks begin over Bankia’s plan to cut about 6,000 jobs, or more than a quarter of its workforce, and reduce its branch network by 39 percent by 2015.

Bankia’s plan to shrink its network to as few as 1,900 branches from 3,117 was a condition for the 18 billion euros ($24 billion) of European bailout funds it will receive to help clean up its balance sheet. Santander is also meeting unions after saying Dec. 17 it would merge its Banco Espanol de Credito SA unit into its main Spanish banking franchise to reduce its combined network by 700 branches.

‘Very Worried’

At 26.6 percent, Spain had the highest jobless rate in the 17-member euro area in November, where unemployment was 11.8 percent, up from 11.7 percent in the previous month, according to the European Union’s statistics office in Luxembourg. Spain’s economy will probably shrink for a second straight year in 2013, according to a Bloomberg News survey of economists.

“We’re very worried that the pendulum in the banking industry seems to be swinging back against progress and growth,” said Jose Maria Martinez, Madrid-based general secretary of Comfia, which represents banking employees at the Comisiones union. “It’s like going back to the seventies.”

The credit boom drove a 352 percent growth in combined loan books of Spanish banks from 1998 to 2008. Savings banks accounted for much of the expansion as they took advantage of a booming economy to expand beyond their regions, said Cuervo.

Spain had about 1,000 people per branch in 2010, the highest concentration in the EU, according to the European Central Bank. The region’s average was 2,952 people per branch, with about 6,000 in the Netherlands and some 5,000 in the U.K.

Decreasing Branches

Government orders last year to make lenders recognize accelerated losses on more than 180 billion euros of soured real estate assets are helping spur mergers and encourage branch closures as banks cut costs. Nationalized lenders including Bankia and NCG Banco have no choice as the terms of European aid force them to reduce their balance sheets by more than 60 percent by 2017 compared with 2010.

While the number of Spanish bank branches decreased to 39,072 at the end of September from a peak of 45,707 in 2008, and staff numbers dwindled to 242,726 from as high as 270,855, according to Bank of Spain data, Santander Chief Executive Officer Alfredo Saenz has said that lenders will close down as many as 15,000 more branches in coming years.

At CaixaBank, the branch network jumped in the third quarter of last year after Spain’s third-biggest bank absorbed Banca Civica SA, a lender formed from a grouping of former savings banks.

‘Boom Years’

By contrast, Santander will have 3,675 clients per branch assuming customer levels remain constant once it completes the 700 closures planned as a result of its takeover of Banesto. Banco Sabadell SA, a lender that became Spain’s fifth-biggest bank after absorbing Caja de Ahorros del Mediterraneo, counts 2,968 customers per branch after closing 300.

Bankia has 3,117 branches serving 7.5 million clients, a ratio of 2,488 clients per branch. Assuming customer numbers remain constant, that would rise to one branch per 3,947 clients by the time it closes more than 1,200 branches by 2015 under its restructuring plan.

“Overcapacity is a relevant issue because there are banks that still have a lot more to do,” said Daragh Quinn, a banking analyst at Nomura International in Madrid. “Banks have to do everything they can to improve profitability and efficiency because the levels of growth they were seeing in the boom years are not going to come back.”