Barclays Sells Spanish Business to Caixabank for GBP 630M - Analyst Blog

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As part of its long-term strategy to regain profitability, Barclays PLC ( BCS ) 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 ( MS ) 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 ratio.

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. ( C ) and Lloyds Banking Group plc ( LYG ), 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 division.

Currently, Barclays currently carries a Zacks Rank #3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BCS , MS , C , LYG

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