The merger proposed last month between two savings banks in Andalusia, the smaller Caja de Jaén and the larger Unicaja, marks the start of a wave of consolidation that will sweep through Spanish banking in the months ahead.
The larger publicly quoted Spanish banks have so far survived the crisis in good shape, partly thanks to the conservative provisioning policy imposed by the Banco de España through the good times. But as the Spanish economy contracts sharply and unemployment rises above 18% and heads higher, problem consumer and housing loans are rising fast. The best-managed Spanish banks’ non-performing-loan ratios will rise from under 2% in 2008 to 5% or higher next year and the savings banks will be particularly hard hit.
The head of one Spanish bank says: "The savings bank model has not worked so well. The exposures of the cajas are very concentrated. They don’t have much geographic diversification across Spain or much diversification by products or market segments. They don’t do a great deal of corporate business."
The Spanish government received a warning of these mounting problems in March when it had to rescue Caja Castilla-La Mancha after it was unable to engineer a merger deal with any other institution.
