Banco Sabadell bought Spain's collapsed CAM for one euro and became a top-five bank

By autumn 2011 Caja de Ahorros del Mediterráneo (CAM) was the emblem of Spain's collapsed housing credit. The Banco de España intervened it in late July after a first-half loss of €1,136m; €17.5bn of its book was tied to property with delinquency near 40%, Moody's pushed its rating deep into junk, and the central bank had opened a €3,000m credit line to keep it funded. When the sale closed on 24 November, CaixaBank and the other large banks had declined to bid. The only firm offer came from Banco Sabadell, a mid-sized Catalan lender with roughly €95bn of assets.

On 7 December 2011 the FROB formulated a restructuring plan integrating CAM into Banco Sabadell, approved by the Banco de España the same day. The deposit guarantee fund would subscribe capital increases totalling €5,249m, buy 100% of Banco CAM, and then transfer it to Sabadell for the price of one euro. The decisive term was an asset-protection scheme: for a set portfolio the fund would absorb 80% of losses over ten years, after existing provisions were used up — an audit put maximum losses at €5,558m against €3,882m of provisions.

Sabadell took the whole business — every branch, all the staff, all the deposits — and with it a step change in scale: assets up about 75%, from roughly €95bn to €167bn, making it Spain's fifth-largest bank by assets, ahead of Banco Popular. The bill was equally real: repayment of the €3,000m central-bank credit line, and the task of funding in the wholesale market a balance sheet whose debt was rated junk.

Assets up about 75%, from roughly €95bn to €167bn, and fifth place in Spain by assets — bought for one euro with €5.249bn of deposit-guarantee support behind it.

Being the only bidder collapsed the price to one euro, while the deposit guarantee fund carried the €5.249bn recapitalisation, so the operation had a null impact on the state's deficit.

The ten-year asset-protection scheme capped Sabadell's exposure to the property book at 20% of losses above €3.882bn of provisions already held, leaving the tail risk with the guarantee fund.

Scale was the strategic prize: a 75% jump in assets took Sabadell from a Catalan regional to fifth in Spain, ahead of Banco Popular, without raising new equity of its own.

The alternative was wind-down. With Moody's deep in junk, a €3bn official credit line already open and no other bid by the November deadline, CAM had no credible buyer left.

In a crisis the scarce asset is not capital but a bidder willing to put a price on an unpriceable balance sheet. A state loss-sharing scheme converts that into a calculable bet.

The guarantee fund's holding in Banco CAM was transferred to Sabadell on 1 June 2012; the bank had kept operating normally while under intervention. Sabadell inherited the branches, staff and deposits, along with the obligation to repay the €3,000m Banco de España credit line and fund a book the market rated junk. Because the industry-financed deposit fund paid the whole capital injection, the FROB could state the restructuring had no effect on the Spanish deficit — a distinction that mattered as Madrid moved towards requesting European support for its banks six months later.