November 19, 2013 / 9:04 PM / 5 years ago

Spain launches sale of nationalized lender NCG Banco

MADRID (Reuters) - Spain’s bank restructuring fund said on Tuesday it had formally launched the sale of nationalized lender NCG Banco, one of three banks still controlled by the state following a European bailout of the country’s financial system last year.

Spain's Prime Minister Mariano Rajoy attends a weekly cabinet control session at Parliament in Madrid October 30, 2013. REUTERS/Juan Medina

The Spanish government said this week there was plenty of interest from potential buyers. Spain’s three biggest banks Santander (SAN.MC), BBVA (BBVA.MC) and Caixabank (CABK.MC) have publicly said they would study making an offer.

Venezuelan lender Banesco could place a bid, two sources said. Banesco declined to comment on Tuesday.

U.S. investment firms Guggenheim Partners and WL Ross have also expressed interest in NCG Banco in the past two weeks, other banking sources have said. Guggenheim has recently declined to comment and WL Ross has not responded to a request for comment.

Some of the bidders are pressuring the government to sell NCG Banco with some form of extra state aid, such as an asset protection scheme to shield them against future losses, sources have said.

NCG Banco took 9 billion euros ($12.2 billion) in rescue funds from Spain and Europe and returned to profit in the year to September. But deposits fell nearly 3 percent compared with the same period in 2012, and its non-performing loans as a percentage of total credit reached 16.7 percent.

Spanish banks’ average bad loan ratio was 12.1 percent in August.

The treatment of tax assets at NCG Banco will be another key factor in the auction. Like Spanish rivals, NCG Banco has so-called deferred tax assets (DTAs), some of which the government will turn into state-backed credits so that they can count as capital under new Basel III rules.

That may influence how much extra state aid bidders ask for.

“The winner here may well be the one who puts in the least onerous offer in terms of what they want the state to put in,” said one banker familiar with the process.

“You may have one bidder asking for an asset protection scheme to cover 10 percent of loans, or another asking for more to be covered.”

The bank restructuring fund FROB said bidders had until December 13 to present binding offers. Unless an offer is substantially better than others, a second phase will then take place with the possibility for the three best bids to be revised upwards.

($1 = 0.7394 euros)

Reporting by Julien Toyer and Sarah White; Editing by Fiona Ortiz; editing by David Evans

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