Santander plans to invest in Spain's bad bank

Sat Nov 17, 2012 8:13am EST
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By Sonya Dowsett and Carlos Ruano

MADRID (Reuters) - Spain's Santander (SAN.MC: Quote) plans to invest in the country's so-called bad bank in a sign that healthy domestic lenders are willing to support the entity created to clean up the aftermath of a 2008 property crash.

"The bank plans on investing in the bad bank," a spokesman for Santander, Spain's biggest bank, told Reuters on Saturday.

Spain has set up the bad bank to siphon off toxic real estate assets from bank balance sheets that date from the property crash. The bad bank's creation is a condition of receiving up to 100 billion euros ($127 billion) of aid in a European bail-out of the country's financial sector.

Spain's second biggest bank, BBVA (BBVA.MC: Quote), is considering investing in the vehicle, but has yet to make a decision, a BBVA spokesman told Reuters on Saturday.

Sabadell (SABE.MC: Quote) is also considering investing but has not yet made a decision, a Sabadell spokesman said.

The bad bank's managers are currently in talks with BBVA, Sabadell and Barcelona-based Caixabank (CABK.MC: Quote) about them investing in the vehicle, a banking source said. Caixabank was not immediately available for comment.

An Economy Ministry source said on Friday the bad bank could go ahead just with backing from domestic investors but foreign investors would give it credibility.

The bad bank will initially have equity of 3.9 billion euros. But the government needs private investors to stump up 2.2 billion euros, or 55 percent of this, in December, the Economy Ministry source said on Friday.   Continued...

A woman uses an ATM machine at a Santander bank branch in Madrid October 16, 2012. REUTERS/Susana Vera