MADRID (Reuters) - Spain’s economy minister said on Monday it was looking at all options for the sale of two nationalised banks as rising loan defaults and more volatility on stock markets renew questions over how it can fix the weakened sector.
Bankers say that Spain must pump more funds into some of the banks it used EU and its own money to bail out last year if it hopes to sell them soon, with the government’s options for recovering some of the investment narrowing.
A recent government-commissioned report on the lenders by investment bank Nomura and consultancy McKinsey suggested quickly selling Catalunya Banc FROBNC.UL and NCG Banco before their assets deteriorate further, two banking sources said.
Economy Minister Luis de Guindos said on Monday that the government was exploring all options for the sale of the two banks, although he said there was no rush.
“The buyers always try to give the impression that things are worth less than what they are... We are convinced that these entities have value,” de Guindos told COPE radio in an interview on Monday morning.
“We have to do it at the right moment and the process must be competitive... We have five years to do it, there’s no need to rush. I know there are some that want it to go quickly.”
Barcelona-based Catalunya Banc and NCG Banco, from the northern region of Galicia, which together hold less than 10 percent of the Spanish market, took some of the biggest chunks of the 41 billion euros (35 billion pounds) in aid Madrid took for troubled lenders last year.
Fernando Restoy, deputy head of Spain’s central bank, opened the door on Friday to an asset protection scheme to speed up the sale of the banks, although he repeated the government’s view that they do not need more capital.
Bankers say potential bidders are demanding guarantees against losses, or more capital, even though the banks are now mostly cleansed of the soured property assets that nearly felled them.
Two financial sources familiar with Catalunya Banc’s accounts said interested bidders had identified additional losses of between 3 billion and 4 billion euros at the bank due to souring loans to households and companies.
But pumping extra funds into the banks would hinder Spain’s attempts to slash its deficit in a prolonged recession, as it faces public anger over deep public spending cuts.
It would also bring the money spent on saving Catalunya Banc closer to its cost of liquidation. Under the terms of the European bailout Spain cannot spend more on capitalising the bank than it would on winding it down.
“There is interest in these banks,” one senior Madrid investment banker said. “But that interest is at a price which is very different to where the government’s price is. Buyers essentially want to get money to buy them, as bank acquisitions in Spain have been more sour than sweet as norms keep changing and provisioning needs keep rising.”
Spain has spent over 75 billion euros to help 14 banks in the past four years. To cover extra needs, it has the option to draw down more of the 100 billion euro aid line from Europe.
Additional reporting by Sarah Morris; editing by Patrick Graham and Fiona Ortiz