Dealing with an ailing sector

The CEO of Spain's La Caixa Sees His Bank Boosting Market Share as Some Rivals Are Swallowed.

Article bye Christopher Bjork in The Wall Street Journal

Updated May 1, 2011

A seasoned deal maker, Juan María Nin is positioning Barcelona-based bank La Caixa for growth as the ailing Spanish banking industry gears up for another round of consolidation.

La Caixa is emerging from Spain's lengthy economic crisis as one of the country's strongest financial institutions, alongside international banking powerhouses Banco Santander SAand Banco Bilbao Vizcaya Argentaria SA .

Juan María Nin says experience has shown that 'banking giants are born during economic crises.

Juan María Nin says experience has shown that 'banking giants are born during economic crises.

The largest of Spain's unlisted savings banks, also known as cajas, La Caixa avoided the excessively risky bets on Spain's once booming housing market that have gotten many of its peers into trouble. And now it is in the process of shedding its unwieldy mutual ownership structure and transforming itself into a listed bank. Mr. Nin, the bank's 58-year-old chief executive, is spearheading the bank's push to boost its market share in Spain by 50% by 2014.

"We have the ability to make acquisitions, and with acquisitions we can boost our [market share] in regions where it is lowest," Mr. Nin says.

As a senior executive for several banks, Mr. Nin has been involved in some of Spain's biggest mergers, including the 1999 tie-up between Banco Central Hispano and Banco Santander, two large acquisitions for Banco Sabadell SASAB +1.34% and three smaller ones at La Caixa, which he joined in 2007.

Mr. Nin says his appetite for deals started at the age of 25 when he was the youngest member of a team of civil servants negotiating Spain's accession to the European Common Market, a predecessor to the European Union.

"That was my first big integration," he says.

This experience will be an asset as the restructuring of Spain's banking industry, reeling from the collapse of a decade-long housing boom, enters a new phase. Over the past year, the number of cajas was reduced to 18 from 45 as the Bank of Spain arranged a series of shotgun weddings in which it forced weaker lenders into tie-ups with strong peers. The government has injected billions of euros in new capital to shore up solvency levels.

Still, many of the newly created entities need to raise more funds to meet minimum capital levels by a government-imposed September deadline. And concerns are mounting that some may not be viable standalone entities. La Caixa and many listed banks are sniffing around for acquisition opportunities.

"Past experiences have shown that banking giants are born during economic crises," Mr. Nin says, pointing to Banco Santander and BBVA, which became leading national players in Spain during the 1980s and 1990s through mergers and restructurings. Then they parlayed domestic strength into aggressive international growth strategies.

"We want to grow; that's the key," Mr. Nin says.

For now, the focus is domestic. La Caixa aims to boost its share of Spanish deposits and loans to 15% from the present 10%. Though La Caixa already has 5,400 branches across Spain—more than any other bank—Mr. Nin would like to reach 6,000, which he describes as an "adequate number."

In its push for growth, La Caixa has a key advantage over its savings-bank peers—it already has a market listing. This makes it easier to raise financing and capital from international markets.

In 2007, La Caixa listed Criteria, an investment vehicle that brought together most of the bank's vast shareholdings in listed companies. Mr. Nin is overseeing the transfer of La Caixa's banking assets to Criteria, an operation he says will be completed July 1. Criteria will then be rebranded as Caixabank, and, worth about €20 billion ($29.6 billion), will be the No. 10 bank in the euro zone by market value.

A handful of other cajas are now preparing market listings, but they face an uphill battle as many investors are worried by the institutions' real-estate exposure and traditional lack of transparency.

The Criteria listing, which now seems providential, was a difficult deal to pull off in the early days of the global financial crisis. For Mr. Nin, who has a master's degree in law from the London School of Economics, it gave him the chance to test his dealmaking skills on the international stage as he toured the financial capitals of London and New York to woo investors.

La Caixa pushed through the initial public offering and raised €3.5 billion. A few months later, the financial crisis slammed shut the door for IPO's for years to come. "They did it at the last possible moment," says Ramón de la Riva, who worked with Mr. Nin for more than a decade at Santander and Sabadell and now heads Sabadell's private banking and markets division.

In the longer term, La Caixa could shift its focus to international expansion, Mr. Nin says. Its most significant foreign acquisition to date was the $2.4 billion purchase in 2008 of a 20% stake in Mexico's Grupo Financiero Inbursa, a bank controlled by billionaire Carlos Slim. As part of the deal, La Caixa is helping Inbursa develop a retail-branch network in Mexico, leading to the opening of 250 bank branches in key cities. In the coming years, they expect to double the size of that network.

Mr. Nin travels to Mexico four times a year to check on the investment. "The prospects in Mexico are excellent," he says. As part of the deal with Inbursa, La Caixa will also use the Mexican bank as a vehicle for expansion in the U.S. and the rest of Latin America.

When it comes to financing future acquisitions, La Caixa has plenty of assets it could sell. It holds large stakes in two of Spain's biggest companies, Telefonica SA and Repsol YPF SA,REP 0.60% which are worth about €8 billion and have potential capital gains of about €2 billion. And in the long run, La Caixa could dilute its stake in CaixaBank to about 70% from more than 80% now, allowing CaixaBank to raise additional capital by selling new shares, Mr. Nin says.

For now, however,Mr. Nin says it's too early to talk about new partners outside Spain. "We have to consolidate the investments we've made and be sure that we comply with the Basel III capital requirements. When we've solved these issues, we may open the next chapter in our expansion," he says.

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