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Spain: Caja Madrid expands its frontiers

When Caja Madrid's management realized it had little scope to expand in domestic retail banking, it sought new markets both in Spain and overseas

The financial cornershop

While many of Europe's leading retail-oriented banks have been able to exploit what amounts to an almost captive new market on their doorstep, others in Europe have not been presented with such obvious expansion opportunities.

Spain's fourth-largest bank, Caja Madrid, is an example, having found itself up against the buffers as far as continued expansion in its core territory is concerned. Caja Madrid already has close to 2,000 branches in Spain and in 2004 increased its operating profit by 18%. Much of that was driven by the continued buoyancy of the Spanish mortgage market, which contributed to a 19% increase in Caja's loan book in 2004, with impaired loans ending the year at a record low of 0.4%.

Impressive numbers, to be sure, but this performance leaves precious little scope for expansion in the retail market. "We now have about 6% or 7% of the domestic market, which is a very high share," says Caja Madrid's head of capital markets, Carlos Stilianopolous. "The competition in the domestic market is tremendous and makes it virtually impossible for anybody to increase their market share. That is why we decided at the end of the 1990s to grow in other areas which would bring in more revenues."

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