Barclays Bank’s move to offload its retail banking, wealth and investment management and corporate banking businesses in Spain to CaixaBank (formerly La Caixa) will provide the Spanish lender with more than €1.5bn of estimated assets under management (AUM) in structured products.
SRP data shows that Barclays has been involved in the domestic structured retail products market since 2005 and has marketed more than 150 structures including 72 structured notes and 46 structured capital-protected funds, 20 structured deposits, as well as life insurance products and structured pension plans. The UK bank has 56 live structures in Spain which are to be serviced and managed by CaixaBank.
The Spanish bank, for its part, has been active in the Spanish retail structured products market since 2005 and has brought to market more than 500 structures with an estimated sales volume of €28.3bn. The bank has 45 live structures in the market with an estimated value of €4.3bn.
A senior banker at CaixaBank who did not wish to be named told SRP that if the deal goes ahead Barclays’ commercial network will bolster the bank’s exiting distribution capabilities.
“Media reports point out that Barclays has approximately 550,000 retail and private banking customers,” said the source. “These are clients that are used to investing in ‘added value’ products, and structured products are one of this type of products.”
Under the agreement, CaixaBank, Spain’s third-biggest bank, will acquire Barclays Bank SAU and certain subsidiaries, which represent total assets of €22.2bn and liabilities of €20.5bn, for €800m (approximately £630m), payable in cash upon completion which is subject to regulatory approval and is expected to be finalised “at or shortly after the year end”, said Barclays in a statement.
On completion, approximately 2,400 Barclays employees and 262 branches will transfer to CaixaBank, which will also manage €9.9bn in deposits and €4.9bn of AUM.
Earlier this year, Barclays launched a bad bank to offload £115bn of “toxic assets”, including its European consumer arm. The lender bought Spain’s Banco Zaragozano, a consumer and commercial bank, in 2003 for about €1.1bn to become the country’s largest foreign-owned bank.
The sale is part of Barclays’ strategy announced earlier this year by chief executive Antony Jenkins, who is seeking to bring back profitability by offloading some of its non-core European divisions, streamlining its investment banking unit and cutting costs, including a 19,000 worldwide headcount reduction exercise taking in a number of senior executives in its investor solutions business.
The sale of the Spanish businesses will decrease risk-weighted assets by about £8bn, Barclays said.
“We were clear that this business, while not central to Barclays’ strategy, could be attractive to another owner and today’s announcement reflects that perspective,” Jenkins said. “We remain on track to rebalance Barclays as part of our strategy to deliver sustainable returns for our shareholders.”
According to the Financial Times, Barclays will make a loss of £500m on the Caixa deal – £400m will be booked in the third quarter of 2014 and £100m in the final quarter.
Market consolidation
The purchase follows Banco Bilbao Vizcaya Argentaria’s (BBVA) decision in July to acquire nationalised lender CatalunyaCaixa in the latest M&A event in the country’s financial services industry.
The financial crisis led to a complete restructuring of the Spanish financial framework, which resulted in the compression of the competitive landscape by 68.4% to 29 active providers in 2013, down from the peak of 92 active issuers in 2008.
A senior source at the bank told SRP that it is still early days and that no decision has been made in relation to how CatalunyaCaixa will be integrated into the bank’s operations. CatalunyaCaixa, which is one of the leading distributors of structured deposits in Spain and continues to operate independently, reported at the end of June sales of over €300m of its deposit range which were driven mainly by its "Extra" structured deposits.
A BBVA spokesperson also told SRP that as stated by BBVA’s chairman and CEO, Francisco González, in July when the deal was announced, the bank expects the acquisition of CatalunyaCaixa to have a positive impact on the group’s results as of 2016.
BBVA will pay the Fund for the Orderly Restructuring of the Banking Sector (FROB) €1.18bn for CatalunyaCaixa and the deal is expected to be closed in the first quarter of next year.
Spain’s local media have reported that BBVA is facing a dilemma over ditching or keeping the CatalunyaCaixa brand, as according to a survey carried by the bailed-out firm 30% of its clients would swap to a competitor outfit if BBVA was to eliminate the word Catalunya from its brand.
CatalunyaCaixa was itself born as a result of the merger of Caixa Catalunya, Caixa Tarragona and Caixa Manresa in 2010. Other more complicated mergers and acquisitions include that of Caixabank, which resulted after La Caixa acquired Caixa Girona in 2010, and then Banca Civica in 2012.
Other high profile mergers include that led by Bankia, which was formed in 2011 after the merger of seven regional saving banks including Caja Madrid, Bancaja, La Caja de Canarias, Caja Ávila, Caixa Laietana, Caja Segovia and Caja Rioja.
Barclays UAE disposal
Barclays has also announced the sale of its United Arab Emirates (UAE) retail banking business to Abu Dhabi Islamic Bank (ADIB) at an estimated pre-tax gain of £119m.
Barclays’ Investment Bank and Barclaycard operations are not part of the disposal of the Spanish businesses, while the UAE transaction is confined to a portfolio of mortgages, unsecured credit and deposits.
“We remain committed to our retained businesses in these territories,” said Barclays in a statement.
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