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”.