Banesco of Venezuela in €1bn deal
with Spain’s NCG Banco
By The FINANCIAL TIMES
The Spanish government has sold NCG Banco, one of
three nationalised banks that was still in state hands, to Banesco of Venezuela
in a €1bn deal that highlights growing investor appetite for the country’s
resurgent banking sector.
Banesco’s bid trumped offers from the
three largest Spanish banks as well as bids from JC Flowers, the US
private equity house, and US investors Guggenheim Partners.
Under the rules of the auction, the winning offer
must have been at least €200m higher than the next-closest bid – a gap that
underlines the Venezuelan bank’s determination to gain a foothold in Spain.
Spain´s Fund for Orderly Bank Restructuring, which
was running the auction, said 40 per cent of the €1bn bid would be paid on
completion of the deal, with the remaining 60 per cent paid in instalments
until 2018.
The deal marks the first successful sale of a
nationalised Spanish bank to a foreign buyer since the start of the crisis and
will come as a relief to the government after it failed to sell Catalunya Banc,
another nationalised lender, in an auction this year.
Both Catalunya Banc and Bankia,
the biggest of the lenders nationalised during last year’s banking crisis,
remain in government hands.
The Spanish government has injected almost €9bn
into NCG Banco, meaning in spite of the sale it will still be sitting on a
heavy loss. However, unlike in previous privatisations, the state is not
providing an asset protection regime to Banesco, meaning Madrid avoids any
exposure to future losses at NCG.
Spanish banking stocks have risen sharply during
the past six months, amid heightened
investor confidence that the country’s financial sector is now on a
sounder footing. The new sense of optimism stands in marked contrast to last
year, when Madrid was forced to negotiate a €100bn European bailout package to
rescue its undercapitalised banking sector.
The outcome of the auction defied the predictions
of several Madrid-based bankers who argued throughout the process that only a
domestic bank with an already large retail presence could produce sufficient
cost savings to justify the takeover of NCG Banco.
Unlike its Spanish rivals, Banesco also stands to
gain much less from the deferred tax assets currently sitting on NCG’s books,
as it will probably have fewer taxable profits than Santander,
BBVA
and Caixabank
in the years ahead. DTAs can be used to lower a company’s future tax burden.
In political terms, however, the Venezuelan bid is
likely to have appeared the most attractive, thanks to Banesco’s promise to
keep NCG Banco as a standalone group headquartered in the northern Spanish
region of Galicia.
According to Spanish media reports, the prospect of
maintaining a regional banking group – and the avoidance of branch closures –
was enough to secure the political support of the government of Galicia, a
traditional stronghold of Spain’s ruling Popular party.