As part of its long-term strategy to regain profitability,
) announced the divestiture of its non-core Spanish operations. The
bank will be selling its retail banking, wealth and investment
management, and corporate banking businesses in the country to
Caixabank S.A. for £630 million ($1.05 billion).
Under the terms of the transaction, Caixabank would assume
approximately 262 branches and 2,400 employees, together with
nearly 550,000 new retail and private banking clients. As of Jun
30, 2014, Barclays' Spanish operations held €22.2 billion in assets
and €20.5 billion in liabilities. Morgan Stanley (
) advised Caixabank for the deal.
The divestiture is expected to close by the end of this year or
early next year. However, it is still subject to regulatory
approvals and customary closing conditions. Notably, Barclays'
Spanish investment banking and credit card operations are not part
of the deal.
Nevertheless, Barclays will report an after-tax loss of £500
million. Of the total amount, £400 million will be recorded in
third-quarter 2014 and remaining at the time of closing the deal.
Notably, the transaction will lower Barclays' leverage exposure by
£15 billion, while providing a 0.12% boost to its core Tier 1
Spain was one of the European nations to be battered by the 2008
subprime mortgage crisis. Given the lingering economic slowdown,
the country is still not out of woods. This is the primary reason
behind many financial institutions discontinuing their Spanish
operations. Other than Barclays, Citigroup Inc. (
) and Lloyds Banking Group plc (
), among others, have sold certain of their Spanish operations.
For Barclays, the sale of its Spanish businesses is a step towards
exiting non-core operations in Europe, as per its May 2014
announcement. After regulatory issues and fines hampered its
growth, the company is undertaking initiatives to restructure core
banking operations, boost capital levels and regain investors'
confidence. (Read More:
Barclays to Slash 14K Jobs, Create 'Bad Bank'
Further, Barclays recently completed a deal to sell off its United
Arab Emirates-based retail operations to Abu Dhabi Islamic Bank in
Dubai. This divestiture would result in a pre-tax gain of £119
million. Hence, following the latest spin-off, the company will be
left with its Italian, French and Portuguese branches, apart from
loans in the European retail unit of its Barclays Non-Core
Currently, Barclays currently carries a Zacks Rank #3 (Hold).
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