The donkeys gallop ahead

Largest cajas de ahorros by income after tax (year to March 1998)		Ptas (m)
1	Caja de Ahorros y Pensiones de Barcelona (La Caixa)	16,779
2	Caja de Ahorros y MP de Madrid	12,120
3	Caja de Ahorros de Galicia	6,050
4	Bilbao Bizkaia Kutxa	5,804
5	Caja de Ahorros de Valencia, Castellon y Alicante (Bancaja)	4,867
6	Caja de Ahorros del Mediterraneo	4,256
7	Caixa de Cataluna	3,927
8	MP y CA de Ronda, Cadiz, Almeria, Malaga y Antequera (Unicaja)	3,683
9	Caja de Ahorros y MP de Zaragoza Aragon y Rioja	3,682
10	Caja de Ahorros y MP de Gipuzkoa y San Sebastian	3,568
11	Caja de Ahorros de Salamanca y Soria	3,181
12	Caja Espana de Inversiones, Caja de Ahorros y MP	3,028
13	Caja de Ahorros de Murcia	2,951
14	Caja de Ahorros de Navarra	2,588
15	Caja General de Ahorros de Granada	2,428
16	Caja de Ahorros de Asturias	2,258
17	Caja de Ahorros Municipal de Vigo	2,176
18	Caja General de Ahorros de Canarias	2,038
19	Caja de Ahorros y MP de Cordoba (Cajasur)	2,031
20	Monte de Piedad y Caja de Ahorros de Huelva y Sevilla	1,907
Source: Confederacion Espanola de Cajas de Ahorros
Largest cajas de ahorros by assets (March 1998)		Ptas (bn)
1	Caja de Ahorros y Pensiones de Barcelona (La Caixa)	8,544
2	Caja de Ahorros y MP de Madrid	6,153
3	Caixa de Catalunya	2,896
4	Caja de Ahorros de Galicia	1,948
5	Caja de Ahorros de Valencia, Castellon y Alicante (Bancaja)	1,846
6	Caja de Ahorros del Mediterraneo	1,701
7	Bilbao Bizkaia Kutxa	1,585
8	Caja de Ahorros y MP de Zaragoza Aragon y Rioja	1,478
9	MP y Caja de Ahorros de Ronda, Cadiz, Almeria, Malaga y Anteguera (Unicaja)	1,425
10	Caja Espana de Inversiones, Caja de Ahorros y MP	1,227
11	Caja de Ahorros y MP de Gipuzkoa y San Sebastian	1,120
12	Caja de Ahorros de Salamanca y Soria (Caja Duero)	990
13	Confederacion Espanola de Cajas de Ahorros	827
14	Caja de Ahorros de Castilla La Mancha	795
15	Caja de Ahorros y MP de Cordoba (Cajasur)	724
16	Caja de Ahorros de Murcia	699
17	Caja de Ahorros de Asturias	696
18	Caixa d'Estalvis del Penedes	695
19	Caja de Ahorros de Navarra	649
20	Caja General de Ahorros de Granada	640
Source: Confederacion Espanola de Cajas de Ahorros

They account for half of the country's banking assets, they are a powerful political force and they are immune from takeover. Their invulnerability is perhaps the most remarkable aspect of Spain's 51 cajas de ahorros (savings banks), for while their ownership structure effectively insulates them from any hostile predator, the cajas can make acquisitions. Several have been actively expanding their empire by buying banks.

This has raised cries of unfair competition. The cajas, say the banks, can throw their capital around without having to worry about accountability to shareholders. But for the foreseeable future there seems to be little for the banks to do but grit their teeth. The banks have watched the cajas snap up seven of the 15 commercial banks put on the market over the past six years. The latest takeovers were in April when Abbey National's Spanish business was sold to Caja de Ahorros del Mediterraneo for Pta31.1 billion ($207 million) while at the same time Caja de Murcia acquired 13 branch offices of Banco de Madrid from its parent Deutsche Bank.

Bankers complain that the playing field is not level. The cajas would be a natural route for the banks to grow their domestic market share at a time when acquisition targets have become thin on the ground. The Spanish banking sector has gone through a protracted and painful merger process over the past decade.

Spain's big banks are almost all the product of mergers: Banco Bilbao Vizcaya (BBV) kicked off the rationalization of the Spanish banking industry 10 years ago. This was followed by the coming together of Banco Central Hispano in 1991 and Banco Santander's acquisition of Banesto in 1993, as well as the creation of Argentaria, the now fully-privatized conglomerate of former state-owned banks.

Marisa Mazo, analyst at Robert Fleming Spain, points out that achieving cost savings from mergers is no easy matter in Spain. Tough labour laws make it difficult to reduce staff costs quickly. Staff reductions cost about Pta40 million for each employee in redundancy payments compared with an average annual salary of Pta6 million. But over time mergers can still bring cost savings. "The key to success lies in the pace of cutting the headcount," she says. "Personnel costs represented 69% of general expenses in the Spanish banking sector in 1997. Therefore sharp staff cuts are vital to the success of a merger."

The cajas would be an ideal outlet for expansion in terms of synergy, but while there is no law stopping banks from acquiring cajas, in practice there is no chance of any caja selling out to a bank. The cajas are a key financing vehicle for Spain's 17 autonomous regions. Local governments and town councils appoint board members who exercise majority control; usually there is minority representation of customer associations and trade unions as well.

The government uses the cajas to provide soft loans to local enterprises. Sometimes the cajas also acquire equity. Some have bought stakes in newly-privatized companies such as Telefonica, Tabacalera and Argentaria to bolster the position of chairmen put into office by the centre-right Popular Party. After its election victory last year, the governing party moved to replace several appointees of the ousted Socialist Party. This has given the new government a continued interest in keeping the cajas within the state's embrace.

"It would be nothing short of astonishing, to say nothing of suicidal, for the government to give in to pressure to alter the cajas' statutes," concedes a disgruntled Madrid banker. "The government's objective now is to push its people into office in Andalusia and other regions where the [ruling] conservatives did not obtain a majority victory and where the cajas remain under socialist control."

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