12 August, 2009

Spain Bank Mergers & Acquisitions (BBVA)

Spanish Banking Rivals: Banco Bilbao Vizcaya Argentaria’s (BBVA) modern building towers over Banco Santander’s (formerly BSCH) classical office in Bilbao, Spain.

With special thanks to Carlos Gotay Martinez, who gave me the permission to use this photo. To see Carlos Gotay's other photos, click on: http://www.flickr.com/people/imagonovus/

A Few Words about Spain's Banking Sector

Even though Spain's two largest banks Banco Santander and BBVA are well-known internationally, the fact is most Spaniards don't bank with either of their country's banking giants. In Spain, the banking sector has been dominated by a large number of loosely-affiliated regional mutual banks that controls about half of the domestic banking market.

Both Banco Santander and Banco Bilbao Vizcaya Argentaria have made numerous acquisitions in Latin America since 1990. In many cases, as only a minority stake was taken initially (often from a national government or a central bank), the value of the acquisition and the percentage of ownership have not been well-documented in the English press.

Grupo BBVA S.A. (Banco Bilbao Vizcaya Argentaria S.A.)

Banco de Bilbao

Interestingly, both of Spain's most well-known banks were founded in 1857 and both went through a major merger in 1999. In the case of Banco Bilbao Vizcaya Argentaria, its history goes back to the 1857 establishment of Banco de Bilbao by the Junta de Comercio (Bilbao's Trade Association). Banco de Bilbao's initial functions were to issue currency and discount notes. In the second half of the 19th century, Banco de Bilbao specialized in financing long-term industrial projects like the steel, mining, coal, railway and port industries. In 1902, it took over Banco del Comercio to further strengthen its commercial banking business.

During Francisco Franco's authoritarian regime in the 1940s, Banco de Bilbao acquired some 16 domestic banks to expand into other areas of banking business. Following the decade-long economic slump and hyper-inflation, the Spanish economy began to stabilize in the late 1950s with the help of the International Monetary Fund, the World Bank and Spain's determination to economic reforms. Retail banking and consumer finance became a focus for Banco de Bilbao in the early 1970s, when it began to issue credit cards. In 1987, Banco de Bilbao rocked the Spanish banking sector when it launched a hostile offer for its bigger rival Banco Español de Crédito (Banesto). However, the attempt failed when Banesto was able to summon enough support from Spain's regulators to deny the merger. Banesto subsequently was taken over in 1994 by archrival Banco de Santander, today's Banco Santander group.

Banco de Vizcaya

In 1901, a rival bank in Bilbao was set up by its merchants. Known as Banco de Vizcaya, like its local rival Banco de Bilbao, it accepted deposits and provided loans to commercial and industrial concerns in northern Spain. The bank expanded aggressively and by 1918, had already built up a national presence. In the 1970s, Banco de Vizcaya broadened its product lines to include personal investment products, business leasing services, and insurance products.

(Banco Hipotecario, Caja Postal, Banco de Crédito Industrial, Banco de Crédito Agrícola, Banco de Crédito Local, Banco Exterior)

Banco Hipotecario (the "Mortgage Bank", known as BHE) was founded in 1872 by an act of parliament to provide longer-term loans for property (mortgages).

Caja Postal (literally, the "Postal Case") was created in 1909 as a government department to accept deposits from the public.

In 1920, a consortium of banks (including Banco de Bilbao and Banco de Vizcaya) and manufacturers formed Banco de Crédito Industrial (BCI) to finance long-term industrial development.

Then in 1923, the Spanish Ministry of Agriculture set up the Servicio Nacional de Crédito Agrícola to provide loans to the domestic agricultural co-operatives.

In 1925, public and private interests joined forces to create the Banco de Crédit Local (BCL). BCL was a joint-stock bank with the expressed mandate to finance local (municipal) development and public infrastructural construction.

Lastly, Banco Exterior (BEX) was established in 1929 to promote exports by offering trade financing. It held a monopoly in providing exports finance until 1982, after which it became a universal bank, launching non-trade financing products like accepting personal deposits offering loans to non-business clients.

In 1962, Banco de Crédito Industrial (BCI), Banco Hipotecario (BHE) and Banco de Crédito Local (BCL) were nationalized under the Banking Sector Reform Act. Meanwhile, Servicio Nacional de Crédito Agrícola was converted into Banco de Crédito Agrícola and became a state-owned company also. In other words, the four specialty banks that offered industrial, mortgage, municipal and agricultural loans all became government entities. In 1971, all four banks were converted into joint-stock companies.

In 1991, the Spanish government formed the Corporación Bancaria de España (CBE) as a government-controlled bank and credit entity. In 1998, a complex merger involving the already-privatized Corporación Bancaria de España, Banco Exterior (which had then taken over Banco de Crédito Industrial), Banco Hipotecario and Caja Postal formed a new, giant universal bank Argentaria S.A.

Recent transaction(s):

  • In 1988, just one year after Banco de Bilbao's proposal to acquire Banco Español de Crédito (Banesto) failed, Banco de Bilbao merged with long-time rival Banco de Vizcaya to form Banco Bilbao Vizcaya S.A. (BBV).
  • In 1995, BBV acquired 50% of Peru's Banco Continental de Peru.
  • Also in 1995, BBV acquired a 66% stake in Mexico's Probursa.
  • In 1996, BBV acquired 56.2% of Colombia's Banco Ganadero. By 2006, BBVA held 95% of Banco Ganadero.
  • Also in 1996, BBV bought 30% of Argentina's Banco Frances. By 2006, the ownership level had risen to 76%.
  • In 1997, BBV acquired a 40% stake in Venezuela's Banco Provincial. By 2006, BBVA’s stake in Banco Provincial had risen to 53%.
  • In 1998, BBV acquired 44% of Chile's Banco BHIF. By 2006, the stake in BHIF had risen to 68%.
  • Also in 1998, BBV bought Puerto Rico's Poncebank.
  • Also in 1998, BBV bought Brazil's Banco Excel.
  • In 1999, Banco Bilbao Vizcaya and Argentaria Caja Postal y Banco Hipotecario S.A. merged to form Banco Bilbao Vizcaya Argentaria S.A.
  • In 2000, BBVA acquired 59.4% of Bancomer S.A. for USD $2.4-billion to form BBVA-Bancomer. Bancomer was Mexico's No. 2 bank. BBVA's existing Mexican unit Probursa was merged into BBVA Bancomer in 2002.
  • In 2004, BBVA bought the 40.6% of Mexico's Bancomer that it did not yet own for Eur 3.3-billion (USD $4.1-billion), making Bancomer a wholly-owned subsidiary of BBVA.
  • Also in 2004, BBVA acquired Texas-based Laredo National Bancshares for USD $850-million.
  • Also in 2004, BBVA bought Mexico's mortgage lender Hipotecaria Nacional for USD $375-million.
  • In 2005, BBVA offered to buy up the 84.7% of Italy's Banca Nazionale de Lavoro (BNL) that it did not yet own for Eur 6.44-billion (USD $8.36-billion). BBVA's bid valued the whole of BNL at Eur 7.60-billion. However, as Italy's highly fragmented banking sector was going through major consolidation, BNL was highly sought after. Later in 2005, France's BNP Paribas S.A. made a surprise Eur 9.0-billion (USD $11.3-billion) offer to buy up BNL. BBVA eventually conceded defeat and tendered its holdings in BNL to BNP Paribas.
  • In 2006, BBVA bought Texas Regional Bancshares for USD $2.16-billion, and State National Bancshares for USD $480-million. Both banks were based in Texas. The combined value of the two transactions was about Eur 2.10-billion.
  • Also in 2006, BBVA made a strategic move in China and Hong Kong by taking a 5% stake in China CITIC Bank for CNY 5.09-billion (Eur 501-million, USD $642-million), and a 15% stake in CITIC Group's Hong Kong unit CITIC International Financial Holdings for HKD $ 4.90-billion (Eur 488-million, USD $625-million). CITIC International Financial was the parent of Hong Kong's Citic Ka Wah Bank.
  • In 2007, BBVA acquired Birmingham, Alabama-based Compass Bancshares Inc. for USD $9.6-billion (Eur 7.33-billion). Compass Bank operated more than 400 branches in Alabama, Arizona, Colorado, Florida, New Mexico and Texas. Prior to this purchase, BBVA already operated in California and Texas. BBVA was actively expanding beyond its traditional home market of Spain and Latin America. In 2008, BBVA announced that its 650 branches in the U.S. would all be re-branded BBVA Compass.
  • In 2008, BBVA, along with China's state-owned CITIC Group launched a public offer to privatize Hong Kong-listed CITIC International Financial Holdings (henceforth, CIFH) for HKD $14.23-billion (USD $1.83-billion). CIFH was at the time 55.16%-owned by CITIC Group and 14.51%-owned by BBVA. Under the privatization offer, CITIC Group and BBVA would each increase its stake in CIFH by 15.16%, raising CITIC Group's interest in CIFH to 70.32%, whereas BBVA's interest will increase to 29.68%. Separately, BBVA would also raise its (direct and indirect) stake in China CITIC Bank to 10.07% from the current 4.83%. The total cash outlay to BBVA was about Eur 800-million. CIFH wholly owned Hong Kong's CITIC Ka Wah Bank (which had 30 branches), and had a 15% stake in China CITIC Bank (500 branches), a 40% interest in CITIC International Assets Management and a 50% interest in CITIC Capital.
  • In 2009, BBVA Compass bought the bankrupt Guaranty Bank of Austin, Texas, from the FDIC. BBVA Compass took over Guaranty's USD $12-billion of assets and USD $11.5-billion of deposits. The purchase of Guaranty added 105 branches in Texas and 59 branches in California to BBVA Compass' 579-branch network in the U.S. The shutdown of Guaranty Bank would cost the FDIC USD $3-billion in losses.
  • In December 2009, BBVA bought another 4.93% of China Citic Bank for Eur 1-billion (USD $1.51-billion, CNY 10.14-billion). Following the latest purchase, BBVA would own 15% of the Chinese bank.
  • In October 2010, BBVA agreed to buy 24.9% of Turkey's Turkiye Garanti Bankasi AS for Eur 4.20-billion (USD $5.84-billion). BBVA would acquire a 6.3% stake from Turkey's Dogus Holding AS for Eur 1.48-billion and a 18.6% stake from General Electric Co. for Eur 2.72-billion. BBVA would raise Eur 5.06-billion (USD $7.0-billion) from a rights issue to pay for the purchase. The Spanish bank also acquired the right to take a controlling stake in Garanti Bankasi after 2015. As of 2010, Garanti Bankasi served 9 million clients through 792 branches and 3,000 ATMs.
  • In November 2017, BBVA accepted a binding offer from Canada's Bank of Nova Scotia (Scotiabank) to sell 68.19% of BBVA Chile for USD $2.2-billion (CAD $2.9-billion, EUR 1.89-billion, CLP 1.44-trillion). The sale is however subject to the approval by Chile's Said family, which owns 31.62% of BBVA Chile. BBVA Chile had USD $22-billion of assets, 127 branches and 4,000 employees.
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