Catalunya Banc, countdown for a possible rescue.

The Government is finishing off all its contacts with the financial institutions in order to try to sell Catalunya Banc in smaller parts, a solution which seems to be essential in order to avoid a new banking rescue, as informed by financial sources to Europa Press.

These sources establish October as the deadline to decide for or against asking for a new aid from Brussels in order to refinance Spanish banks, which would mean accepting new conditions. Before that date, banks should reclassify the refinanced credits with the new requirements demanded by the Bank of Spain and also, Oliver Wyman will make a new test of the banking assets and the awaited losses in view of the worsening of the economy.

“The Government will need to ask for another banking rescue in October unless it finds a solution for Catalunya Banc”, the sources declare, stressing that the President, Mariano Rajoy, will try out all possibilities. “Rajoy is against the humiliation of having to ask for a second rescue”, they assure.

Sources within the Ministry of Economy and Competitiveness have assured Europa Press that “in no case” are they contemplating the request of more funds from Brussels for Spanish banks. The Government has received 41.300 million Euros for this. The Memorandum of Understanding signed in order to receive this aid expires mid January and they do not contemplate asking for more funds. “There is not a chance for a new extension”, they point out from the Department lead by Luis de Guindos.

The Bank of Spain estimates in 208.206 million Euros the credit portfolio of the whole refinancing and restructuring sector at the end of 2012. Analysts estimate that the sector will have to face additional provisions of around 10.000 million Euros based on the new regulations of the supervisor. The Government considers this quantity acceptable and hopes that institutions will be able to cover any needs of capital through the market. Catalunya Banc will therefore test once again the strength of the financial sector and its advance in the restructuring process.

Sources within the market calculate that the institution, now presided by Carlos Pla, has a deficit of around 3000 million Euros. This amount would include the impact of the new requirements for refinancing, the potential default rate on the SMEs and small sized loans that have not been transferred to Sareb.

In fact, the FROB is trying to place among “healthy” institutions packages of branches of the former Catalan savings bank from its network outside Catalonia. They have started by trying to sell branches in Madrid, although sources point out that the Government has not found any support from investors. “No institution is interested right now in branches in Madrid”, they assure. Sources within Catalunya Banc have informed Europa Press that the process of sale of branches has been started “with no rush” and is at a “preliminary stage”. The investment bank Nomura is establishing the value of the network of branches outside Catalonia and looking for potential investors. (…)

Catalunya Banc agreed with Brussels that it would focus his network of branches in Catalonia from now on until 2016. This was one of the conditions to release the aid of 9084 million Euros to restructure the institution. In any case, the sector hopes that Pla´s management will carry out the adjustments “needed”. The sources urge him to close branches “as soon as possible” and demand a “real” business plan and disinvestments.

The Frob has already cancelled the auction on Catalunya Banc twice due to a lack of competitive offers. The Minister of Economy, Luis de Guindos, has insisted that the former Catalan savings bank will not be sold at a loss. Experts now advise celerity in the process of sale due to the possible depreciation of the institution, which is seeing its market share being reduced month by month.

Source: Expansión