Banco CAM takeover receives EC approval

EC approval for CAM rescue

The European Commission has approved a 2.4 billion euro capital injection for Banco Caja de Ahorros del Mediterraneo (CAM) from Spain’s bank bailout fund, along with a 10 year government guarantee to cover any future loses.

CAM was seized by Spain’s central bank last year after it’s toxic property loans wrecked it’s business. Banco Sabadell then agreed a takeover deal of CAM for one euro in December.

“The disappearance of Banco CAM from the market as an independent entity, the sale of its banking business to Banco Sabadell and the deep restructuring foreseen should ensure long- term viability without continued state support,” the commission said in a statement.

Before the deal with Sabadell becomes effective CAM must cancel a 3 billion euro liquidity line received from the bailout facility, the EU said. CAM also obtained EU permission to get as much as 700 million euros if it can’t benefit from deferred tax assets following the takeover.

As part of the process approximately 450 branches will be closed, affecting 2,200 staff, 40% of which will be in the Valencia, Murcia and Balearic regions. These closures are expected by the end of 2013.

The closures will also affect the group internationally. Sources report that Banco de Sabadell recently asked the Florida Office of Financial Regulation to approve the acquisition and subsequent closure of CAM’s international agency branch in Florida.

Sabadell purchase struggling CAM

Now part of Sabadell

Banco Sabadell SA (SAB) have agreed a deal to take over struggling Spanish bank Caja de Ahorros del Mediterraneo (CAM) for the symbolic price of 1€.

Sabadell will take over  CAM after the largest bank bailout in Spanish history saw the central bank inject 5,249 million euros into the stricken bank, via the deposit guarantee fund (Fondo de Garantía de Depósitos, or FGD). This was larger even then the Banesto bailout seen in 1993 when $3.5 billion was injected into the bank.

For the first nine months of this year CAM saw losses of 1.73 billion euros. Defaulted loans made up 10.9% of that amount, Sabadell said.

As a result of the deal Sabadell will become Spain’s fifth-largest lender with 166 billion euros in assets.

Additionally 80% of the banks future losses will be protected for 10 years via a protection scheme (Esquema de Protección de Activos, or EPA)  designed by the central bank.

CAM was seized by the Bank of Spain in July after a high number of defaulted loans made the business untenable. This is not the first bank takeover in Spain this year. In October Banco Pastor SA (PAS) was taken over by Banco Popular Espanol SA (POP) for 1.35 billion euros.

Rumours of bids from other banks were dismissed by Banco de España who said that Banco Sabadell had presented the only “solid bid”.