* BBVA will not participate in Sareb despite government push
* Santander and Caixabank to invest 600-700 mlns euros each
* Insurers and other to put around 500 mlns euros
By Jesús Aguado
MADRID, Dec 11 Spanish bank BBVA will
not join domestic peers in investing a total of around 2.5
billion euros ($3.3 billion) in the country's so-called "bad
bank", four sources with knowledge of the matter said on
Spain's second-biggest bank's reluctance to invest in the
bad bank, set up to siphon off bad property assets from bank
balance sheets, will be a blow for the government which had
hoped the biggest banks would all invest in the scheme.
It was not immediately clear why BBVA had decided not to
participate and the bank, which had been blowing hot and cold on
its involvement in the bad bank, called Sareb, since September.
The bank would not comment on the matter.
BBVA's decision will not hamper the bad bank's plans to be
up and running by year-end, as contributions from other Spanish
banks and insurers will top the 2.5 billion euros of private
investments - half the total capital of 5 billion - the
government needed to reduce the strain on state coffers.
Of the 2.5 billion euros, around 1.6 billion will be in the
form of subordinated debt and the remaining 400 million will be
The vehicle is being set up to help restore stability in the
bank sector after a decade-long property boom ended abruptly
five years ago. It was also a condition for receiving around 41
billion euros of European loans.
"Healthy Spanish banks plus Ibercaja, Popular and
some other smaller banks will invest around 2 billion euros,
which will be split according to their market share," said one
of the sources who was directly involved in talks between the
banks and the Spanish authorities.
"This will take into account the fact that BBVA is not
willing to participate."
Insurance companies and other national and international
private investors will deliver the remaining 500 million euros,
the source said, adding the latest round of talks was on Monday.
Caixabank and Santander will be the main
private contributors with 600-700 million euros each, while
Popular and Sabadell will invest 250-300 million
apiece, two of the sources involved in the negotiations said.
The sources said the final numbers may need fine-tuning by
the end of December.
Caixabank, Popular, Sabadell and Santander all declined to
comment, as did the economy ministry and the Bank of Spain.
BBVA chief executive Angel Cano said in October the bank had
no interest in investing, a turnaround from earlier comments by
chairman Francisco Gonzalez who said he was considering taking a
stake in the scheme.
Analysts have said BBVA was right to express doubts about
the profitability of the bad bank which aims to have a return on
equity of 14-15 percent in a conservative scenario.
"BBVA is right to doubt the profitability plans of the Sareb
as it is very difficult to see how to make money by selling
loans or real estate assets in a depressed property market,"
said Angel Berges, chief executive officer at Analistas
Financieros Internacionales, a think-tank.
Since peaking in 2007, housing prices have fallen around 30
percent, on average, and analysts consider the bottom of the
market may still be two years off with prices potentially
falling a further 20-30 percent.
The government is studying the possibility of giving tax
breaks as a sweetener for lenders willing to invest in the bad
bank's equity, another banking source said.
"If BBVA does not participate in the end, it will be
penalised in some way," the source said.
The economy ministry said no decision had been taken yet.
The decision from BBVA not to participate comes as the
government struggles to lure international investors.
The bad bank drew a lot of interest among foreign investors
but they said they wanted more clarity on the assets to be
transferred into SAREB, their value and how sales of the loans
will eventually be financed.
Four nationalised lenders - Bankia, Catalunya
Banc, NCG Banco and Banco de Valencia - will dump 45
billion euros of assets into Sareb by year-end. Four other
lenders with lower capital needs, such as Banco Mare Nostrum
(BMN), were then expected to put around 15 billion euros into
the bad bank by February.
($1 = 0.7736 euro)
(Additional reporting by Carlos Ruano and Andres Gonzalez;
Editing by Dan Lalor and David Holmes)