Spain’s strong banks prepare to snap up assets from weak rivals

Tim Wallace
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N’S healthiest banks are looking to buy assets from their bailed out counterparts as the weaker institutions are forced to shrink by the government, ratings agency Fitch said yesterday.

The outcome of the bailouts will see increased concentration in the market as larger banks get bigger at the expense of smaller institutions.

Banco de Sabadell is looking to buy Banco Mare Nostrum’s retail operations in two regions, a move which Fitch believes will kick off a major new round of merger and acquisition activity in 2013.

“Resilient banks will take advantage of others that are receiving state aid and shedding businesses as part of their restructuring plans,” said the agency.

“We expect banks being bailed out to come down in size by at least 25 per cent, and follow the path of Irish and Greek banks in deleveraging and sector consolidation.”

Fitch argued this is positive to stability in the sector, as “a smaller number of more efficient and viable banks should have a greater capacity to absorb losses from Spain’s sovereign and real estate crisis.”

However, the researchers also noted that continued consolidation in the industry is not enough alone to solve the sector’s problems.

Despite the expected changes, Fitch believes funding costs will remain high for Spanish banks for several years to come.

The EU agreed earlier this year to bail out Spain’s banks to the tune of up to €100bn (£80.67bn), with the European Commission this week agreeing the sector met its requirements for aid. Spain hopes to restructure its institutions by the start of December, creating a “bad bank” as part of the rescue plan.