Spain Bank Mergers & Acquisitions (Bankia)

Photo: Bankia's head office building at plaza de Castilla in Madrid. (Credit: Bankia's official web site.)

Bankia

Even though Bankia was created only in 2010 from the amalgamation of seven de facto bankrupt Spanish regional savings banks, its oldest constituent predecessor -- Caja Madrid -- dates from 1702. 

Before the 20th century, a state-funded social welfare system to alleviate the hardship faced by the poor during an economic recession was practically non-existent. To help the underclass to survive, the Roman Catholic Church had historically run charitable pawnshops to allow the poor to obtain a small temporary loan (at zero or very low interest rate) or to convert whatever few possessions that they had into cash. The mandate of these charitable pawnshops and loan institutions was not to maximize profits but to offer blacksmiths, farmers, labourers, artisans, servants and the unemployed financial assistance in times of need.

The first church-sponsored charitable pawnbrokers began in Italy in the 1460s, and the concept spread to Spain and Portugal and eventually to their overseas colonies also. In Spain, such a charitable pawnshop and loan office was known as a “monte de piedad”, or literally a mound of piety. In 1702, an Aragon priest named Francisco Piquer Rudilla established a Monte de Piedad in Madrid, which relied on donations by the city’s wealthy aristocrats to provide small interest-free loans to the working class and underclass on collateral such as tools, clothes or jewellery. In 1836 the Monte de Piedad de Madrid began charging moderate interest on loans to cover increasing operating overhead costs.

In 1838, a Royal Decree created a savings bank known as the Caja de Ahorros de Madrid (literally, the Savings Casket of Madrid), which is based on the non-profit savings bank model of promoting savings for the working class. The savings bank also had a mandate of social responsibility and Unitarianism by financing local businesses, as well as educational and hospital infrastructure. During much of the 19th century, Caja de Ahorros and Monte de Piedad offered similar service to similar customers.

In 1896, the Monte de Piedad and Caja de Ahorros de Madrid merged to become Monte de Piedad y Caja de Ahorros de Madrid, whose order of the words was reversed eventually to Caja de Ahorros y Monte de Piedad de Madrid as the banking side of the business became much more prominent than the pawnbroking side.

Over time, as the state took increasing responsibility for social welfare from the Church, the savings bank dropped the “Monte de Piedad” part of the name completely and became known simply as Caja Madrid.

A modernization program in the 1970s led to Caja Madrid offering more banking products than previously. During the decade many of its systems and processes were also computerized. Then between the 1980s and 1990s, the bank expanded geographically outside of the capital region.

Caja Madrid’s nationwide expansion in the latter half of the 1990s coincided with a decade-long real estate bubble that started in 1996 and burst in 2008. As in most asset bubbles, the causes of the housing craze are complex and inter-related. The discussion and theorization of which is not the intention of this article. Suffice to say that between 2000 and 2007, some over 600,000 new dwellings were built yearly in Spain, a number that exceeded the combined figure of the other four major EU economies Germany, France, the United Kingdom and Italy. In total, some five million new homes were constructed in those eight years by the time the speculative housing craze came to a sudden end.

Riding this mad real estate euphoria, between 1996 and 2010, Caja Madrid expanded exponentially and grew five times in size and became the No. 4 financial institution in the country. But perhaps much more tellingly about Caja Madrid’s over-sized exposure to the housing market, the No. 4 ranked Caja Madrid held the most real estate loans amongst all Spanish banks.

The overheated housing bubble was not confined to Spain, as similar market conditions also happened in the United States, Great Britain, Ireland, Iceland, Portugal, Italy and Greece; and to a lesser degree other markets around the world. In 2007, the unsustainable housing bubbles first began to burst in the U.S. and Britain, then quickly spread to other markets. This marked the beginning of the infamous 2007 global credit crisis. Banks around the world saw their formerly steady and cheap funding sources disappeared overnight as the inter-bank credit market froze. Banks and institutional investors refused to renew short-term financing for real estate loans that were at risk of default. Banks, investment funds and credit default swap policy holders found themselves exposed to an incredibly complex and untraceable web of liabilities, potentially exposing themselves to trillions of losses.

In Spain, Caja Madrid was not alone in the midst of this liquidity crisis, as Spain’s entire savings bank industry had been lending recklessly to the real estate speculation. Massive loan losses quickly depleted many banks’ capital base and by July 2010, Spain had to place seven de facto bankrupt regional savings banks (Caja Madrid, Bancaja, Caja Canarias, Caixa Laitana, Caja Rioja, Caja de Ávila and Caja Segovia) into the Sistema Institucional de Protección (“SIP”, literally Institutional Protection Scheme). 

Five months later, the Banco de Espana (Spain’s central bank) formally brokered the consolidation of the seven regional savings banks in the SIP under the administration of Banco Financiero y de Ahorros (roughly “Bank of Finance and Savings”), or commonly known as BFA.

The foundation that used to own Caja Madrid ended up with 52% of BFA, followed by Bancaja owning just under 38%, and the remaining five small savings banks collectively held just over 10%. Meanwhile, the Spanish government provided the bank with EUR 4.465-billion of liquidity to keep it afloat. 

In March 2011, Bankia was chosen as the new name for the seven consolidated savings banks. Just four months later, the Spanish government rushed to float Bankia on the stock market but found little interest from international institutional investors. Failing to attract overseas professional investors, Bankia turned to those domestic individuals who had little or no knowledge of investing risks and the inside situations of the bank. Bankia branch managers and union leaders encouraged long-time customers and employees to invest by assuring safe and steady returns.

Bankia’s initial public offering in July 2011 raised EUR 3.1-billion when 47.6% of the bank was floated on the stock market, of which 60% of the IPO was offered to 350,000 individual investors. BFA continued to own 52.4% of Bankia.

Unfortunately, less than one year after the IPO, in May 2012 Bankia discovered major discrepancies in its financial accounts, which led to its 2011 financial statement being re-stated from a profit of EUR 309-million into a massive EUR 3.3-billion loss. Immediately Bankia was once again on the verge of collapse. The Spanish government converted its 2010 EUR 4.465-billion loan into preferred shares and took over 100% of BFA, wiping out the stakes of the seven savings banks that formerly owned Bankia. Through BFA, Spain now indirectly controlled 45% of Bankia and became its largest shareholder.

Shockingly, that loan conversion to re-capitalize Bankia was far from enough, and its collapse – if allowed to happen -- would have triggered Spain’s deposit guarantee fund to cover a staggering EUR 60.5-billion of insured deposits. Despite that, depositors would still suffer losses of EUR 52-billion from uninsured deposits. To avoid this disastrous scenario, between December 2012 and December 2013, another Eur 17.96-billion of state aid was injected to BFA (EUR 7.34-billion) and Bankia (EUR 10.62-billion), bringing the total rescue package for Bankia to EUR 22.42-billion. In the restructuring, BFA’s stake in Bankia was raised to 68.4%. The small retail shareholders who bought shares in the 2011 IPO essentially saw their investment wiped out when the shares dropped to “penny stock” levels.

Meanwhile, to satisfy the terms of the state bailout, Bankia sold its American subsidiary City National Bank of Florida to Chilean bank BCI for USD $883-million in May 2013. Caja Madrid originally bought 83% of the City National Bank of Florida for $927 million cash in 2008.

Following a period of stabilization of its books, BFA sold a 7.5% stake of Bankia in February 2014 for EUR 1.3-billion to international institutional investors, representing the first time the Spanish state received a repayment following the EUR 22.42-billion provided to the bank. 

Meanwhile, small investors who lost their investment during the first Bankia IPO in 2011 battled in the courts to get compensation. Finally, in January 2016, a Spanish Supreme Court ruling forced Bankia to agree to return the money that the small investors lost when the bank was nationalized in May 2012. Bankia later committed EUR 1.84-billion to fully refund its retail investors for their losses in the doomed 2011 initial public offering.

Then in December 2017, BFA sold another 7% of Bankia for EUR 818-million, reducing its stake to 60.6%. The mathematics of BFA’s investments and divestments in Bankia between the 2013 and 2017 does not work out based on the official press releases. One can only presume that BFA had converted some of Bankia’s debts into equity holdings.

In 2018, Bankia bought Banco Mare Nostrum in stock for EUR 825-million. Like Bankia itself, Banco Mare Nostrum was created through the amalgamation of several bankrupt savings banks (Caja Murcia, Caixa Penedès, Caja Granada and Sa Nostra).

In September 2020, Bankia agreed to merge with fellow Spanish lender CaixaBank to create the largest Spanish bank in terms of domestic market share and assets. The acquisition valued Bankia at EUR 4.3-billion (USD $5.2-billion). At the end of 2019, Bankia served almost eight million clients via its mobile and on-line platforms, over 5,300 ATMs and almost 1,700 branches.

The CaixaBank-Bankia merger closed in March 2021 and the Spanish state’s 61.8% stake in Bankia would be diluted to 16.1% of the enlarged CaixaBank. The La Caixa Foundation, one of Europe’s biggest charities, would remain CaixaBank’s largest shareholder with 30 per cent of the group compared with its current 40 per cent stake.

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Spain Bank Mergers & Acquisitions (Banco Santander)

Photo: Banco de Santander's old head office building in Santander, northern Spain. Banco Santander celebrated its 150th anniversary in 2007.

With special thanks to Steve Wong for allowing me to use his photo. You can view his photo stream on flickr.com via this link: http://www.flickr.com/photos/wongoz/


Banco Santander, S.A.

(Formerly Banco Santander Central Hispano)

Banco Santander

Banco de Santander was established in the city of Santander in 1857 under a Royal Decree signed by Queen Isabel II. Banco Santander’s home market of Cantabria in northern Spain at the time had strong trading ties with Spain’s colonies in Latin America, and the bank flourished from trade financing between the two continents.

For much of the 20th century, however, Spain endured turbulent times: World War I disrupted the Spanish economy as it did to other European nations. Following the Great War, the Spanish economy recovered and entered a phase of rapid industrialization. But the 1929 Wall Street Stock Market Crash sent shock waves across the Atlantic and a number of major Spanish banks failed, though Banco Santander withstood the crisis. Just two years later in 1931, the Spanish monarchy was yet again replaced by a republic form of government, and political unrest boiled over between the Nationalists and the Republicans. In 1936, Spanish Civil War broke out and devastated the economy and social order that took the country decades to recover.

In 1939, Dictator Francisco Franco’s forces won the civil war and imposed strict political oppression and economic controls. Banks were banned from entering new areas of business but were allowed to merge with each other. Banco Santander acquired Banco de Ávila in 1942, gaining its first foothold in Madrid, and then acquired rival Santander-based Banco Mercantil in 1946. By 1957, Banco Santander’s 100th anniversary, it was the No. 7 bank in Spain.Banco Santander’s international expansion began in 1960 with the purchase of Argentina's Banco El Hogar Argentino. In 1965, Banco Santander and Bank of America jointly founded the Banco Intercontinental Español (Bankinter). One year later, Santander bought the First Nacional Bank de Puerto Rico, followed by the 1982 purchase of Banco Español-Chile. During the 1980s, the bank established presence across Latin America, in such countries as Brazil, Costa Rica, Dominican Republic, El Salvador, Guatemala and Uruguay.

In 1987, the bank bought auto finance provider CC-Bank in Germany, representing its first acquisition in Europe outside of Spain. It also bought a stake in Portugal's Banco de Comercio e Industria.

By 1994, Banco Santander had built up a 60% stake in Spanish rival Banco Español de Crédito (known as Banesto, founded 1902). In 1995, it launched a major expansion in Latin America including Argentina, Brazil, Colombia, Mexico, Peru and Venezuela. In 1998, the bank took full control of Banco Español de Crédito (Banesto).


Banco Central Hispanoamericano

Banco Central was founded in 1919 in Madrid by several wealthy aristocrats. The new bank took advantage of the post-World War I economic growth and became a major force in financing Spain’s heavy industries such as coal, steel, iron, and shipping. In 1931, like many countries around the world, the Banco de España, formerly a joint-stock commercial bank, became Spain’s central bank and withdrew from the deposit-taking and lending business. Banco Central promptly filled the retail market void left by Banco de España.

During the 1940s and 1950s, Spain’s economy remained severely depressed and underdeveloped compared to most of Western Europe. In 1958, with the help from the International Monetary Fund and other agencies, Spain began to take steps to control its spending and debt, remove its price controls and wage freeze, while encouraging foreign investment. Banco Central once again relied on its expertise in providing long-term credit to finance hydro-electric and petroleum projects. A decade of economic reforms finally led to a gradual rise of the middle-class in the late 1960s. Banco Central then began to expand its retail banking business by offering chequing accounts and consumer credit.

Despite these changes, Spain’s banks, including Banco Central, were still considered smallish, bureaucratic, over-staffed and uncompetitive by international standards. In anticipation of EU’s adoption of the Euro and cross-border competition from other member nations, Spain’s banks entered a phase of frenzy consolidation beginning in the late 1980s.

In 1988, cousins Alberto Alcocer and Alberto Cortina, who were married to sisters Esther and Alicia Koplowitz, owners of Spanish construction giant Construcciones y Contratas (Conycon), attempted to gain control of Banco Central’s board by accumulating a 12% stake in the bank. Banco Central’s chairman then orchestrated a merger plan with Banco Español de Crédito (Banesto) in an attempt to dilute los Albertos’s stake and control. Los Albertos (as Alberto Alcocer and Alberto Cortina were nicknamed by the popular press) responded by buying up a stake in Banesto also to exert influence in both banks. After a nine-month deadlock, los Albertos agreed to sell their stake in Banesto providing that the Banco Central-Banesto merger be called off. In a bizarre twist of events, the Koplowitz sisters divorced their husbands in 1990 following a much publicized extramarital affair conducted by Alberto Cortina, and los Albertos lost their seats in Conycon and Banco Central. Both Banco Central and Banesto’s chairmen survived the assault and kept their positions. The original Banco Santander eventually bought 73.5% of Banesto in 1994 for about USD $2.07-billion (ESP 285-billion).

Recent transaction(s):

• In 1991, Banco Central took over the ailing Banco Hispanoamericano (founded 1900). The merged bank became known as the Banco Central Hispanoamericano S.A. and promptly cut 10,000 jobs and closed 20% of the branches.
• In 1996, Banco Santander acquired 93.4% of Banco de Venezuela from the Venezuelan government for about USD $351-million. Founded in 1890, the bank was nationalized in 1994 before being sold to Banco Santander. In 2008, Venezuela once again nationalized Banco de Venezuela.
• In early 1999, Banco Santander bid USD $12.6-billion for Banco Central Hispanoamericano to form the new Banco Santander Central Hispano (BSCH).
• Later in 1999, BSCH also bought Banco Totta & Açores and Crédito Predial Português, gaining a 10% market share (1999 figure) in Portugal. BSCH had intended to buy all four banks controlled by the Champalimaud Group, but its proposal was opposed by the Portuguese government. The European Union subsequently ruled against Portugal and forced it to approve the sale of Totta & Açores and Crédito Predial Português to BSCH.
• In 2000, BSCH bought a 66.5% voting stake (33% economic stake) in Brazil's No. 3 bank Banco do Estado de Sao Paolo (known as Banespa) for USD $3.80-billion (Eur 4.38-billion). Within a few months, BSCH acquired the rest of Banespa for another USD $1.07-billion (Eur 1.20-billion), bringing the total cost to USD $4.87-billion (Eur 5.58-billion). Banespa had 577 branches in Brazil.
• Also in 2000, BSCH bought 97% of Brazil's Grupo Financeiro Meridional S.A., consisting of Banco Meridional and Banco de Inversiones Bozano Simonsen.
• Also in 2000, BSCH bought Mexico's Grupo Financiero Serfín from Mexico's government-controlled banking regulator Instituto para la Porteccíon al Ahorro Bancario (IPAB).
• Also in 2000, BSCH acquired a stake in Chile's Banco Santiago.
• Also in 2000, BSCH bought Venezuela's Banco de Caracas. BSCH then merged Banco de Caracas into its 97%-owned Banco de Venezuela to create the country's largest bank.
• Also in 2000, BSCH bought 75% of Miami-based Internet-based brokerage company Patagon.com International for USD $529-million. Patagon.com specialized in the Spanish- and Portuguese-speaking markets in Latin America.
• In 2002, BSCH bought a further 35.45% of Banco Santiago from the Chilean central bank for USD $685-million (Eur 772-million). BSCH subsequently merged Banco Santiago into its Banco Santander Chile subsidiary.
• In 2002, BSCH sold 24.9% of Mexico's Grupo Financiero Santander Serfín to Bank of America for USD $1.60-billion.
• In 2003, BSCH bought Italian consumer finance company Fincosumo from Italy's Sanpaolo IMI for Eur 140-million.
• In 2004, BSCH made a surprise GBP 8.5-billion (USD $15.75-billion) bid for British mortgage bank Abbey National. This represented the first cross-border acquisition of a major British bank by a Eurozone bank. Back in 2001, the British anti-competition commission vetoed Lloyds TSB's bid to take over Abbey National.
• In 2005, in a complex agreement, BSCH bought 19.9% of U.S. bank Sovereign Bancorp for USD $2.4-billion. In turn, Sovereign Bancorp took over Brooklyn, New York-based Independence Community Bank Corp. for USD $3.6-billion.
• In 2006, BSCH's Abbey National plc subsidiary agreed to sell its life insurance businesses to Resolution plc for GBP 3.6-billion. The sale mainly consisted of Scottish Mutual Assurance plc, Scottish Provident Ltd. and Abbey National Life plc.
• In 2007, BSCH sold its pension fund management business in Mexico, Chile, Colombia and Uruguay to the Netherlands' ING Groep for Eur 945-million (USD $1.3-billion). The business division sold to ING had more than Eur 13.8-billion (USD $19.9-billion) of assets under management. BSCH planned to use the proceeds to fund its share of the proposed Eur 71.1-billion (USD $98.1-billion) offer (with RBS and Fortis) for ABN Amro Holding NV (see below).
• In June 2007, Banco Santander Central Hispano, S.A. changed its name to Banco Santander, S.A.
• In October 2007, after a six-month battle with Barclays plc, Banco Santander SA, along with Fortis SA/NV and The Royal Bank of Scotland Group plc, won the control of ABN AMRO Holding NV with a Eur 70.0-billion (USD $101.1-billion) cash-and-stock offer. The deal was the world's biggest banking merger ever. The tri-bank consortium planned to break up ABN AMRO's global operations with Banco Santander taking over ABN AMRO's Brazilian and Italian operations, namely Banco ABN AMRO Real and Banca Antonveneta. Click here for a detailed timeline of the battle for ABN AMRO Holding.
• In November 2007, in a surprise move, Banco Santander "flipped" ABN AMRO's Italian unit Banca Antonveneta to Italy's Banca Monte dei Paschi di Siena (MPS) for Eur 9.0-billion (USD $13.21-billion). Banco Santander, Fortis and the Royal Bank of Scotland (RBS) had just jointly bought out ABN AMRO Holding NV (including Banca Antonveneta) for Euro 70.0-billion (USD $101.1-billion) deal less than a month earlier.
• In 2008, Santander and GE Money reached a deal to swap European assets worth Eur 2.0-billion (USD $3.16-billion) in total. Under the agreement, Santander obtained GE Money's German, Finnish and Austrian divisions, plus its credit card and automotive financing operations in Britain. In exchange, GE Money took control of Santander's Interbanca, the corporate banking unit of Italy's Banca Antonveneta that was purchased by Santander in 2007 as part of ABN AMRO Holding NV.
• In 2008, Santander bought British mortgage bank Alliance and Leicester plc for GBP 1.26-billion (Eur 1.58-billion, USD $2.51-billion). Alliance and Leicester shares had been languishing since the U.S. housing bust and global banking crisis began in early 2007. With Alliance and Leicester's 254-branch network, Santander would have 959 branches in the United Kingdom and 7.6% of the market.
• In 2008, Venezuelan de facto dictator President Hugo Chavez announced that the country would nationalize Banco Santander's local unit Banco de Venezuela.
• British mortgage bank Bradford & Bingley plc became insolvent over the 2008-09-29 weekend, and was nationalized by the British government. Under a complex transaction, Banco Santander acquired Bradford & Bingley's client deposits and 197 branches for GBP 612-million (Eur 766-million, USD $1.11-billion). Banco Santander already owned Britain's mortgage lenders Abbey National and Alliance & Leicester. The Bank of England and HM Treasury provided GBP 19.1-billion (USD $34.5-billion) of guarantees to Santander to take over the lender. The British government would be left with Bradford & Bingley's mortgage loan, personal loan and other assets with a book value of GBP 50-billion. The government insisted that it would get the GBP 19.1-billion back by either slowly selling off Bradford & Bingley's loan portfolios, or when the borrowers repay their loans.
• In October 2008, Santander privatized Sovereign Bancorp Inc. for USD $1.9-billion in stock. Santander first acquired 24.9% of Sovereign for USD $2.9-billion between 2005 and 2006, the current price of USD $1.9-billion for the remaining 75.1% highlighted how much bank valuation has dropped during the Great Banking Crisis of 2008.
• In May 2009, the Venezuelan government and Banco Santander reached a deal regarding the nationalization of Banco de Venezuela. Venezuela paid USD $1.05-billion to Banco Santander in cash and promissory notes to take control of Banco Venezuela, the country’s No. 1 bank with more than 300 branches.
• In October 2009, Santander sold 18.5% of its Brazilian unit Banco Santander (Brasil) S.A. in an IPO and raised BRL 14.1-billion (Eur 5.47-billion, USD $8.09-billion). Santander Brasil included the former Banespa and Banco Real, and had 3,612 branches and more than 21-million clients with a 10% market share.
• In June 2010, Santander bought back the 24.9% of Santander Mexico held by Bank of America since 2003 for USD $2.5-billion. Santander was Mexico's No. 3 bank.
• Also in June 2010, Santander bought a USD $3.2-billion (Eur 2.59-billion) auto loan portfolio from CitiFinancial Auto at 99% of the portfolio's face value.
• In August 2010, Santander agreed to buy from the Royal Bank of Scotland 311 RBS branches in England and Wales, and 7 NatWest branches in Scotland for Eur 1.99-billion (GBP 1.65-billion, USD $2.63-billion). The 318 branches served 1.8-million clients. Following the the purchase, Santander would have over 1,600 branches in the U.K (see update below).
• In September 2010, Santander agreed to buy the 70.4% of Poland's Bank Zachodni WBK S.A. and 50% of BZWBK AIB Asset Management held by Allied Irish Banks plc for Eur 3.09-billion (USD $3.97-billion). Bank Zachodni WBK was Poland's No. 3 bank and had 512 offices.
• In February 2010, Santander made a public tender offer to buy out the 29.6% minority shareholding of Poland's Bank Zachodni WBK. The latest offer valued the entire Bank Zachodni WBK at PLN 16.58-billion (Eur 4.29-billion, USD $5.83-billion).
• In October 2012, Santander's agreement to buy 316 British branches from the Royal Bank of Scotland Group collapsed citing operational difficulties and unreasonable delays.
• In September 2012, Santander floated 25% of its Mexican operations Santander México and raised about Eur 3.18-billion (MXN 52.8-billion, USD $4.13-billion) from the IPO.
• In December 2012, Santander acquired the 10% of Banesto that it didn't already own for Eur 260-million (USD $342-million).  Santander would end the Banesto brand and the consolidation would result in the closure of 700 branches between Santander and Banesto.
• In June 2014, Santander acquired GE Capital's GE Money Bank AB of Sweden for EUR 700-million (USD $952-million).  GE Money Bank AB provided personal loans and credit cards in the Nordic region, with Sweden accounting for 55% of its loan portfolio, Norway accounting for 26% and Denmark accounting for 19%.  The business had a total loan portfolio of EUR 2.35-billion.  Following the purchase, Santander's Nordic consumer finance operations would count over 1.2-million clients.
• In June 2017, Banco Santander bought Banco Popular Español (Banco Popular) for a symbolic EUR 1 (EUR 1 = USD 1.1276) from EU authorities that had just taken control of the insolvent bank, which has been struggling financially since the global banking crisis began in 2008. In recent weeks, Banco Popular had experienced an increasingly debilitating bank run as nervous depositors withdrew money from the bank. Banco Santander would raise EUR 7.0-billion in new equity to shore up Banco Popular’s balance sheet. The ailing bank was carrying over EUR 37-billion of non-performing real estate loans and properties when it failed. Banco Popular had over 4.6-million clients, almost 12,000 employees and over 1,700 offices.

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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.


Argentaria
(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.
• In November 2020, BBVA agreed to sell BBVA USA Bancshares, Inc. to Pittsburgh-based PNC Financial Services for USD $11.6-billion in cash. Houston-based BBVA USA had $86 billion of deposits and $66 billion of loans. It operated 637 branches in Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico. The sale did not include BBVA Securities, Inc., Propel Venture Partners Fund I, L.P. and BBVA Processing Services, Inc.
• In May 2024, BBVA launched a hostile bid for Spanish rival Banco Sabadell S.A. Initially valued at EUR 12.2-billion, uncertainties over the takeover bid and anticipated challenges by anti-trust authorities led to a 12%-decline in BBVA's share prices, lowering the value of the offer to EUR 9.83-billion (USD $10.4-billion) by November 2024. The purchase, if approved, would boost BBVA's Spanish operations. BBVA actually made most of its profits from its Mexican and Turkish operations.

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