BBVA Pays $1.6 Billion for Catalunya Banc in Spanish Selloff

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, agreed to purchase Catalunya Banc SA for 1.19 billion euros ($1.6 billion) as the government lined up buyers for nationalized lenders amid an economic recovery.

BBVA made the best offer for the whole company, Spain’s bank rescue fund, known as FROB, said in a statement late yesterday. Barcelona-based Catalunya Banc, located in the nation’s richest region of Catalonia, was nationalized in 2011 and bailed out with 12 billion euros in public funds.

Spain is pressing ahead with selling off banks and their assets that fell into state hands during a real estate crash that forced the government to seek 41 billion euros in European bailout funds in 2012. Venezuela’s Banesco Group agreed to buy NCG Banco SA for 1 billion euros in December, and FROB sold 7.5 percent of Bankia SA in February for 1.3 billion euros.

“This deal shows we are extremely confident in the current economic recovery,” BBVA Chairman Francisco Gonzalez said in a statement.

Buying Catalunya Banc gives BBVA a firm with about 1.5 million customers, 773 branches and 63 billion euros of assets. Spain’s economy began expanding again in the third quarter of last year and recovery is now gathering momentum, leading the government to predict growth of 1.2 percent this year and 1.8 percent in 2015.

“What BBVA has bought is a footprint in the Catalonia region and has not paid a high price for it,” Jose Ramon Iturriaga, a fund manager at Abante Asesores in Madrid, said by telephone. “BBVA has been very opportunistic.”

BBVA will increase its Spanish loans by 14 percent, deposits by 23 percent and total customers by 18 percent with the purchase, it said.

Shares Advance

Shares of BBVA climbed 2.2 percent to 9.11 euros at 3:55 p.m. in Madrid, valuing the company at 53.6 billion euros. The 43-member Bloomberg Europe Banks & Financial Services Index rose 1.1 percent.

BBVA won’t need to raise capital to finance the purchase, which will have a positive impact on the group’s results in 2016, the bank said in a filing to regulators. The purchase will contribute an average 300 million euros annually to net income from 2018, Jaime Saenz de Tejada, head of strategy and finance, said in a presentation filed with regulators today.

BBVA has identified 1.2 billion euros in cost savings at Catalunya Banc and said its own capital ratio, which was 10.8 percent in March, will decrease by 55 basis points as a result of the deal. Restructuring costs from the acquisition will be 450 million euros, BBVA said.

The lender won’t change its dividend plans as a result of the transaction, said Saenz de Tejada.

FROB said it didn’t offer an asset protection program or agree to bear future losses as part of the sale. The rescue fund expects losses on guarantees it offered in the sale of about 185 million euros even though they could in theory reach 531 million euros, said a FROB official, who asked not to be identified by name in line with its policy.

The transaction was agreed after Blackstone Group LP said last week it will pay 3.6 billion euros for 6.4 billion euros of the bank’s mortgages.

(Updates with comment on dividend in 11th paragraph.)
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