Merged Spanish savings banks expected to have greater appetite for structured products

Consolidation among Spanish savings banks has temporarily stalled structured products distribution, but many believe larger distribution channels will eventually result from the mergers.

Spain’s struggling savings banks, known as cajas, are issuing their own paper as they seek funding, rather than distributing paper issued by the large investment banks. Their problems have culminated in mergers to create new, bigger entities, and once these mergers are finalised market participants believe they will have more interest in structured products.

“An advantage to these mergers could be that these new entities need to prove they can be active in the market, and will be aggressively seeking solutions that can help them raise additional funding,” says Luis Munoz, head of distribution for Iberia at Société Générale in Madrid. The bank is exploring ideas for providing funding for these new entities, he adds.

The structure of the banks will be very different to before. The cajas have previously put their profits into charitable projects and social enterprise schemes, but as publicly listed entities they will be seeking revenues, says Sabas de Hoces, executive director in Morgan Stanley’s derivatives and structured products department in Madrid.

“They will be owned by private investors, so they will have to look for products that provide good investment opportunities to their clients and revenue to themselves,” he says. “This will make them hungrier than before for these types of products… there should be a much bigger appetite for structured products.”

The first product of the mergers to go public will be Bankia, which plans to issue an initial public offering in July. If all goes to plan the rest of the mergers should be completed by the end of this year. By the time the consolidation process is over, the number of savings banks in Spain is expected to halve to around 20.

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