CaixaBank seeks a return on its acquisitions

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Gortázar targets big boost in ROE; Abjures more M&A, after BPI

In June,  the continuing consolidation of the banking sector in Spain and Portugal is set to move to another level, with the annual general meeting of Banco BPI in Portugal due to consider CaixaBank’s bid to buy the remaining 55.9% of the Portuguese lender it does not already own.

It’s a complicated business. CaixaBank owns 44.1% of the Portuguese bank in which it has held a strategic stake since 1995. But its voting rights are capped at 20%. Now the Spanish bank, one of the big winners from domestic consolidation in Spain, sees that as an unsustainable anomaly.  CaixaBank’s hand was forced when BPI stepped forward last year as a bidder for Novo Banco, the good bank carved out of the collapse of Banco Espírito Santo.

Such a bid would almost certainly have required BPI to raise capital, pressing the question of whether its biggest shareholder, CaixaBank, could support any such rights issue with its voting rights still limited.

CaixaBank announced its offer for BPI shares in February at a 27% premium to the previous close, making the offer contingent both on gaining a shareholding above 50% and having the 20% voting cap lifted. That will require support from 75% of BPI shareholders at the AGM on June 17. Getting it looks tricky, given that Santoro Finance, the second-largest shareholder in BPI, with 18.6%, and the vehicle for Isabel dos Santos, daughter of the president of Angola, where BPI has big exposures, appears to have come out against CaixaBank, recommending instead that BPI merge with Millennium BCP.

Analysts wonder if this is just dos Santos’s attempt to push up the price for BPI or an effort to forestall the Portuguese bank from falling into the hands of a Spanish owner that might divest its Angolan operations.

The prospect of CaixaBank picking up a lead position in Portugal through acquiring a merged BPI and Novo Banco receded in April, when BPI did not make it onto the Bank of Portugal’s final list of five potential bidders for Novo Banco.

It’s a confused situation and it might be just as well for CaixaBank shareholders that the Spanish bank is led by a chief executive who knows how to keep his nerve through an M&A battle. Gonzalo Gortázar has been CEO of CaixaBank since June 2014, having been CFO of the Spanish bank from 2009 to 2011. Before that, he spent 16 years as a FIG banker at Morgan Stanley, heading the European FIG group in the darkest days of 2008 and 2009, advising banks across Europe on rescue deals, recapitalizations and restructurings.

Gonzalo Gortázar, CEO, CaixaBank
 Banking in Portugal is quite similar to banking in Spain and the potential for synergies and scale benefits is clear 

Gonzalo Gortázar 

"The outcome with BPI remains to be seen," Gortázar tells Euromoney. "We have presented what we think will provide the best outcome for all BPI shareholders given the potential for synergies. Banking in Portugal is quite similar to banking in Spain and the potential for synergies and scale benefits is clear. We did not set out with the aim to buy Novo Banco. We want to buy BPI. But the one thing we’re not interested in is keeping the situation as it is, with the gap between our shareholding and voting rights, because that doesn’t make sense for us."

It’s worth reflecting on CaixaBank’s record as an acquirer. It absorbed Banca Civica and Banco de Valencia during the Spanish savings banks crisis and more recently picked up Barclays Bank SAU, the Spanish subsidiary of the retreating UK bank, which brings another half a million customers, 262 branches and €18.4 billion of loans to a bank that now boasts €356 billion of balance-sheet assets.

Befitting an ex M&A banker, Gortázar is proud of CaixaBank’s prowess as a consolidator.

"We paid 0.5 times book value for Barclays Bank SAU, closed the deal on January 2 2015 and have already integrated its IT systems by mid-May," he says. "Our track record in delivering costs synergies ahead of schedule through the acquisitions we have made in the past two years gives me a lot of confidence in our ability to repeat the same with Barclays Bank SAU."

 He offers more insights into the bank’s approach: "We have an integration committee that meets every week but we do not have specialist or separate integration teams. Who is responsible for IT integration of acquired banks? The head of IT is responsible. Who is responsible for integration of their branches? The head of the branch network. We are now a much bigger bank than we were pre-crisis, but there is a huge advantage in managing a bank which has all the benefits of scale, but at the same time is still focused on one market. How were we confident, as the only bidder, to take on Banco de Valencia? Why were we happy to take on Barclays Bank SAU? Because we are entirely focused on Spain. We do not have to make choices of where to allocate our capital relative to our home market." He adds: "The only foreign market we have designs on is Portugal."