Caixabank Considers Offer for Barclays Unit in Spain

Barclays's Spanish Retail Business Estimated to Be Valued at $3 billion

Article by Jeannette Neumann in The Wall Street Journal

Updated June 12, 2014

MADRID—The chief executive of Caixabank SA CAIXY 1.42% said the Spanish lender is considering making an offer for Barclays BCS +0.87% PLC's retail business in Spain, which analysts estimate has a value of as much as €2.2 billion ($3 billion).

"We have a lot of interest," Juan María Nin said in an interview.

He said his Barcelona-based bank, Spain's third largest by market value, is in talks with the U.K. lender but has yet to begin an analysis of mortgages and other loans held by Barclays's 262 offices in Spain.

Barclays once had about 600 offices in Spain and was one of the country's leading foreign banks, but the collapse of Spain's real-estate market in 2008 brought losses on mortgages and other types of real-estate loans, chipping away at the lender's market share and profits. The bank announced in May it would abandon its retail-banking businesses in Western Europe in an effort to boost profitability.

A spokesman for Barclays in Spain declined to comment on the talks with Caixabank.

Barclays's withdrawal is part of a broader retrenchment by foreign banks in Spain. Lloyds Banking Group PLC sold its retail-banking business to Banco de Sabadell SA in 2013. Banco Popular Español SA is in talks to buy Citigroup Inc.'s retail-banking and credit-card business, a deal that is expected to close soon. Sabadell and Popular are Spain's fifth- and fourth-largest nonstate-owned banks by market value, respectively. Many banks have decided to concentrate more on their businesses at home or in their top-earning markets to help bolster their capital ratios after the financial crisis, analysts say.

In the interview Wednesday, Mr. Nin, 61 years old, said an acquisition of Barclays's branches would help bolster Caixabank's market share, particularly in Madrid.

He said Caixabank is also considering a purchase of Catalunya Banc SA, a competitor in its home region, Catalonia. Catalunya Banc's strong presence in and around Barcelona is attractive, he said. The government nationalized Catalunya Banc in 2012, and previous attempts to sell it have failed to attract viable offers. Catalunya Banc went up for auction again on June 2, and interested buyers have until July 14 to submit binding offers.

Spain injected €12 billion into Catalunya Banc, the country's second-most-expensive bank bailout after Bankia SA . The lender's bank branches carry the name CatalunyaCaixa.

Mr. Nin said Caixabank hadn't begun due-diligence research on the bailed-out lender. "I am going to look at both," he said, referring to Barclays and Catalunya Banc.

Mr. Nin is a tried-and-tested deal maker. In the fallout of the real-estate bust, Caixabank bought six Spanish savings banks, known as cajas, and two banks.

Those acquisitions catapulted Caixabank's share of Spanish deposits and loans to 15% from 10%, according to Mr. Nin, overtaking Spanish rivals Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, known as BBVA. Part of that growth came as Barclays and other foreign banks retreated.

"We are the toughest and quickest integrator, at least in Europe," Mr. Nin said, comparing Caixabank's growth through acquisitions to that of U.S. lender Wells Fargo & Co.

He hinted at further buying opportunities in the wake of balance-sheet checkups by European regulators this year that will analyze the strength of the euro zone's biggest banks. The result of these stress tests and asset-quality reviews, he said, will "produce new opportunities for consolidation."

Caixabank in April reported a first-quarter net profit of €152 million, down 55% from a year earlier when the lender booked one-time gains.

Even before any further acquisitions, some analysts and investors think Caixabank's branch network is too big. With 5,700 branches throughout Spain, Caixabank already has more than any other lender. Its branches carry the name La Caixa. Banco Santander has 4,000 branches, and BBVA 3,200.

But Caixabank has the least productive branch network of major banks in Spain as measured by revenue per branch, according to an April 16 report by Citigroup analyst Stefan Nedialkov. Caixabank has a 16.9% branch market share in Spain, Mr. Nedialkov wrote, compared with a 14.7% loan share. To make its branches more efficient, he added, the lender would need to close around 700 branches.

Mr. Nin defended the branch network. "The retail-banking business of the future demands strong market share," he said.

But he acknowledged that Caixabank's heightened focus on digital banking and young Spaniards' growing reliance on mobile banking could shift its bricks-and-mortar strategy.

"We are always going to have the biggest branch network in Spain because in retail banking today in Spain it's an important competitive advantage," he said. "But that doesn't mean that we wouldn't adjust our branch model or the number of branches. If in the future our clients demand another type of branches or if our clients demand another channel and they don't appreciate physical branches, we will make decisions."

In November, Caixabank launched a new type of branch, called Office A, that is meant to have the "look and feel" of an Apple Inc. store, Mr. Nin said.

The Office A branch in Barcelona has a lounge for customers and a display case of different designs available for credit cards. Clients can sign most documents electronically on tablets in or outside the branch. Caixabank is launching a similar office in Seville, in southern Spain, in coming weeks.

Catalonia's regional government leaders in Barcelona have proposed a referendum on independence from Spain, raising questions about the impact on the lender.

"Our contingency plan is that we don't have a contingency plan," Mr. Nin said, adding that he is confident Spanish politicians will reach an agreement that will be "good for Catalonia and all of Spain."

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