When FROB proposed privatizing Novagalicia Banco in mid-2013, Spain’s famous sovereign risk premium remained a heavy weight on the country’s funding. It hovered around 300 basis points, well below the peak of 700 reached in the summer of 2012, but still at levels that public debt could hardly digest. The reorganized Fund for the Orderly Restructuring of the Banking Sector, now known as the Executive Resolution Authority, chose to accelerate the sale of the failed fusion’s business between the two Galician savings banks to curb further brand deterioration amid the financial storm. “Memory is weak for complicated things,” said Francisco Botas, the chief executive of Abanca, during his speech at the UIE Forum in Vigo at the end of last year, discussing the transformation of the leading Galician financial group on the tenth anniversary of the auction in which Banesco prevailed “against the best Spanish and international entities.” He recalled that “our shareholder, Juan Carlos Escotet, with a truly laudable vision decided to invest, not just in Galicia, but in Spain, when no one else was doing so.”
Before the bidding, Novagalicia Banco posted red numbers swelling to 7,932 million euros after a thorough cleanup of the distressed loan portfolio and foreclosed real estate tied to debt worth 8,224 million. Abanca closed 2023 with a business volume of 124 billion euros and a profit of 711.3 million, strengthening its position as the seventh operator in Spain and Portugal, where a bold expansion strategy had been pursued in recent years. Eight corporate transactions had been completed in less than a decade, with the two most recent, Targobank and EuroBic, still awaiting full integration.
Thus, the current corporate structure of Abanca Group results from a growth model sustained over time, combining organic and inorganic expansion. It has seen successive acquisitions and integrations of businesses and financial entities within its scope, a process that aims to simplify the corporate and governance framework, increase market transparency, enable efficient resource allocation, and reduce costs and duplications. These changes are expected to be completed by the end of next May.
This is not the first time the bank with the largest market share in Galicia has faced such a reorganization to streamline internal operations. Abanca Corporación Bancaria absorbed its parent company in 2019, Abanca Holding Financiero, to bolster consolidated equity and to ease the corporate structure and governance. This time, six group entities with almost 850 million euros in total assets are being absorbed directly into Abanca Corporación Bancaria. They are mostly holding companies, with the exception of Abanca’s real estate division, which remains the only unit fully staffed. The merger will not have direct effects on workers, who will keep their jobs under the same conditions, according to the board’s report on the labor implications of the operation.
Beyond Abanca Real Estate Division, which reported revenue of 58 million euros and a net profit of 13.2 million in 2022 according to the latest accounts used for the merger project, Abanca’s parent company will absorb Bankoa Kartera and Bankoa Mediación, acquired with the Basque entity; the contractor Jocai XXI; the developer Torres de Boulevar; and Corporación Empresarial de Representación Participativa, the real estate credit company created during José Luis Méndez’s leadership at Caixa Galicia.
“The current corporate structure of Abanca Group reflects opportunities in the market, which have required adjustments over time in line with conditions offered by the owners of the transferred businesses,” the group notes in its merger proposal. “Circumstances that have dictated the need to restructure at several points to correct deficiencies and duplications.” This is especially relevant after acquiring Targobank, which adds more subsidiaries and increases the group’s complexity and costs. Abanca therefore regards efficiency gains in other areas of the organization as fundamental.
The group intends to lighten its perimeter in parallel with the Targobank integration and its subsidiary CEMCICE Servicios España. The aim is to streamline governance and to leverage existing economic, organizational, and operational synergies that are not accessible under the current split structures. The plan calls for a more efficient corporate management that speeds up decision-making, reduces administrative burden, and eliminates unnecessary duplications in administrative tasks.
There is also a strong economic message. Administrative and management costs tied to regulatory and fiscal obligations, as well as the audit bill, are expected to drop. In the cost optimization effort, areas of spending that have stopped producing are being cut, together with improvements in the cost of human resources and technology, and the treasury costs driven by reduced reserves that must be held at the Bank of Spain.
Related posts:
Abanca and BFCM in Talks to Acquire Targobank Spain, Expanding Iberian Footprint Abanca’s Iberian Expansion: A Deep Dive into the EuroBIC Acquisition and Growth Strategy Abanca 2023 Results and Strategic Outlook Abanca and EuroBic: Iberian expansion and strategic integration Abanca, Nueva Pescanova, and the Deliberate Path Through a Global Reorganization Abanca 2023 Profit Surges to Record Level on Retail Momentum and Strong Asset Quality Abanca Market Momentum and European Banking Trends Abanca Leader Outlines Spain’s Economic Path Forward Rewriting Galicia’s Textile Potential: Recycling, Industry Shifts, and Economic Diversification TheGrefg, Willyrex, Illojuan, El Rubius: A Real Estate Thread Among Top YouTubers Abanca’s New Time Deposits with Insurance, Fixed Returns, and Principal Protection Abanca: Strategic Growth, Leadership Reshaping, and Omnichannel Transformation in North American Context