CaixaBank to Buy Barclays’s Spanish Businesses for $1.1 B

By Charles Penty and Macarena Munoz

Photographer: Simon Dawson/Bloomberg

Antony Jenkins, Chief Executive Officer of Barclays Plc, is cutting costs, shrinking... Read More

CaixaBank SA (CABK), Spain’s third-biggest lender, agreed to buy banking operations in the country from Barclays Plc (BARC) for about 800 million euros ($1.1 billion) in cash to expand its business as economic growth picks up.
The sale includes retail banking, wealth and investment management and corporate banking businesses, CaixaBank, based in Barcelona, said in a statement yesterday. The price represents about 40 percent of the book value, it said.
CaixaBank will add about 270 branches to its
existing network of 5,695 and boost its client base by 550,000 to more than 14 million by buying the businesses from Barclays with assets of about 22 billion euros. The purchase follows Banco Bilbao Vizcaya Argentaria SA (BBVA)’s decision in July to acquire nationalized lender Catalunya Banc SA as the country’s economic recovery picks up momentum and spurs deals.
“The deal is relatively small for CaixaBank but we value it positively,” said Francisco Riquel and Rodrigo Vazquez, from N+1, a Spanish investment bank, in a research note to clients today. They said the transaction adds affluent clients and boosts CaixaBank’s presence in Madrid. N+1 has a “strong buy” recommendation on the lender.
CaixaBank shares rose 0.3 percent to 4.59 euros at 9:18 a.m. in Madrid. They have gained about 21 percent this year. Barclays increased 0.7 percent to 226 pence in London.

‘Further Progress’

Barclays Chief Executive Officer Antony Jenkins, 53, is cutting costs, shrinking assets at the non-core division and eliminating jobs to reduce the lender’s dependence on the investment bank in a bid to restore investor confidence. The bank yesterday also completed the sale of its United Arab Emirates retail banking business to Abu Dhabi Islamic Bank (ADIB) for an estimated pre-tax gain of 119 million pounds ($197 million).
“I am pleased to be announcing further progress on Barclays non-core asset reductions through the transactions,” Jenkins said in a separate statement. “We remain on track to rebalance Barclays as part of our strategy to deliver sustainable returns for our shareholders.”
CaixaBank sees 150 million euros net cost savings in 2016 from the deal, according to a presentation sent to the Spanish stock market regulator today. The transaction will contribute about 80 million euros to net results in 2016, with restructuring costs seen at about 300 million euros.

Bad Bank

Barclays operations in Spain have 18.4 billion euros in net loans and 9.9 billion euros in client deposits, the presentation shows. The bank operates branches in all main Spanish cities, with the biggest presence in Madrid.
Barclays earlier this year created a bad bank to dispose of 115 billion pounds of assets, including its European consumer arm. The lender bought Spain’s Banco Zaragozano SA, a consumer and commercial bank, in 2003 for about 1.14 billion euros to become the country’s largest foreign-owned bank.
The sale of the Spanish businesses will decrease risk-weighted assets by about 8 billion pounds, Barclays said. Leverage exposure is seen declining 15 billion pounds.
Barclays expects to complete the Spanish transaction around the end of the year, subject to regulatory approval. The final price is subject to adjustment based on the activities’ net asset value at the end of the year.