There have been 10 bancassurance-related deals between
banks and insurance companies in Spain so far this year, with banks
keen to sell stakes in insurance subsidiaries. The latest deal,
between Zurich Financial Services and mid-tier player Banco
Sabadell, is also the biggest at €750 million. Rodrigo Amaral

Looking for new sources of liquidity, Spanish banks are selling
stakes in their bancassurance businesses to big insurance
companies. Many of the deals follow a similar theme: the management
of the bank’s insurance operation is delegated to the new partner
while insurance products are distributed through the bank’s

Market growthThe
latest completed deal has also been the biggest so far: Swiss
insurer Zurich Financial Services acquiring a 50 percent stake in
Banco Sabadell’s bancassurance division for €750 million ($1.19
billion), plus an earn-out component of up to a further €150

However, this deal could be eclipsed by news Santander is in
talks to sell its insurance business for up to €4 billion.
According to reports, Santander has approached insurance firms such
as France’s Axa, Germany’s Allianz, and the UK’s Aviva.

For Banco Sabadell, the cash payment represents capital gains
net of tax of €512 million, to be booked as equity. Investment bank
Keefe, Bruyettte and Woods, largely positive on the deal, said this
was a “great price” for Banco Sabadell’s bancassurance

Sabadell, which has 1,200 branches, presented the deal as a
“strategic partnership” that will enable both companies to achieve
a leading position in the Spanish market. The agreement sees Zurich
take on the management of Sabadell’s three insurance companies:
BanSabadell Vida (life insurance), BanSabadell Pensiones (pension
plans) and BanSabadell Seguros Generales (other insurance and
reinsurance areas).

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At the end of 2007, these three managed a total of €6.64 billion
and reported net profit of €41 million, up 21 percent year-on-year.
In individual life insurance, BanSabadell Vida currently ranks 4th
in the Spanish market by premium income. BanSabadell Pensiones
ranks 6th in both individual and corporate pension schemes.

In a statement, the two parties stated that Spain is “one of the
most attractive insurance markets in Europe, with strong growth in
past years and sound future growth expectations. Moreover, both
Banco Sabadell and Zurich consider that bancassurance is the most
important distribution channel for life insurance in the market,
and that it is of growing importance for general insurance”.

Market leadersBanco
Sabadell chairman José Oliu said the transaction “is fully in
keeping with our aim to achieve a leading position in bancassurance
in Spain… [and I am] particularly pleased to verify the level of
market credibility and recognition afforded to Banco Sabadell.”

But other commentators say the deals are motivated also by a
rush for liquidity by Spanish commercial and saving banks, and a
realisation that new capital requirements and legal rules have
turned the insurance sector into a more difficult proposition for
the banking industry.

María José Sánz, a partner at Accenture in Madrid and an expert
in the bancassurance market in Spain, says the search for
partnerships is a result of the rapid development of the insurance
market combined with liquidity issues, which has convinced banks
that alternative business models are worth examining. “Banks and
saving banks have realised that bancassurance is a very attractive
segment and the search for partners answers to a strategy to boost
their businesses,” she told RBI.

Seven other banks have signed agreements with insurance
companies on similar grounds over the past few months. Earlier in
2008, Zurich bought half the insurance business of Caixa Sabadell
(which is unrelated to Banco Sabadell) for €323 million and agreed
to pay €87 million for Caja Navarra’s insurance firm.

Spanish insurance giant Mapfre acquired half-ownership of the
insurance business of Caja Duero (€260 million), Bankinter (€395
million) and Caja Castilla-La Mancha (€308 million); Dutch group
Aegon signed an agreement with Caja Cantabria last year, following
similar deals with Caja de Badajoz, CAN and Caja Mediterráneo in
previous years; and the UK’s Aviva, which has signed a number of
bancassurance deals over the past couple of years, purchased 50
percent of Caja Murcia’s insurance business for €225 million in

Several other banking groups have send they intend to find
partners for their insurance businesses, including Banco Pastor,
Cajasur and Caixa Catalunya, all of which have reportedly hired
advisers to look for suitable opportunities. A spokesperson for
Santander refused to comment on its rumoured disposal.

The insurance market remains undeveloped

Carlos Vargas, a banking expert at the University of Almería,
said that the insurance market in Spain remains underdeveloped.

“Bancassurance as a sales channel looks set to have a promising
future in Spain,” he stressed.

economic crisis affecting the country and the conspicuous decrease
in the demand for banking products are boosting the involvement of
banks and saving banks in the insurance market as they look for new
lines of business. “In addition to that, new products that are very
close to insurance have emerged, like individual saving plans and
guaranteed insurance plans. There has also been an increase in the
sales of financial vehicles like forward contracts, options and
other derivatives.”

But while there is still potential for growth, he added that
banks are now adapting businesses due to the global credit crunch
and also because of legal changes in Spain. For instance, a new
legal entity, called ‘bancassurance operator’ has been created
which lays out in detail what insurance products banks can
distribute via their own networks.

“The new legal framework has helped facilitate substantial
change as it forces [banks] to evolve from a model of pure
distribution of products to another of professional and specialised
services to clients,” Vargas said.

In order to do that, he continued, the law regulates areas such
as transparency regarding publicity and sales, the training of
brokers and, importantly, the protection of clients.

Sánz at Accenture added: “[On top of this] the lack of liquidity
and the capital requirements dictated by Basel II [has] moved
financial groups to sell partially or totally their insurance


RBI DealWatch tracks global financial mergers and
acquisitions, privatisations and demutualisations, flotations,
divestments, share stakes, strategic alliances and joint

Country Participants Type/value Description
Germany Citi, Credit Mutuel Acquisition, €4.9bn Citi has agreed to sell its German retail banking operations to
France’s Crédit Mutuel for at least €4.9 billion ($7.7 billion)
after the French bank outbid Deutsche Bank. The disposal of Citi’s
German retail unit will mean an after-tax gain of about $4 billion
for the US financial services group – and after giving effect to
the proposed sale, Citi’s Tier-1 capital ratio will have increased
by approximately 60 basis points as of 31 March 2008. Citi says its
German unit, Citibank Privatkunden, is one of Germany’s most
efficient retail banks, and generated post-tax earnings in 2007 of
€365 million and at year-end 2007 had a net asset value of €944
million. The sale comes a year after Citi said it would invest in
Germany as a high-growth area. The deal is also a sign of a new,
international focus for Crédit Mutuel, which has so far been one of
the more conservative French banking groups.
Russia Erste Bank, Bank Center-Invest Stake acquisition Erste Bank has acquired 9.8 percent of the outstanding share
capital of Bank Center-Invest, a leading regional bank in the
Southern Federal District of Russia. The cost of the transaction
was not disclosed. Founded in 1992, Bank Center-Invest is
headquartered in Rostov, employs 2,000 staff and has the
second-largest branch network (110 branches) in the Southern
Federal District, home to 23 million people and major cities such
as Rostov, Krasnodar, Volgograd and Sochi. Bank Center-Invest’s
market share in the region by total assets is about 6 percent. At
year-end 2007, total assets amounted to €1.1 billion and
shareholders’ equity to €145 million. ROE stood at 15 percent and
the cost-income ratio was 55 percent.
Greece Alpha Bank, Paramount Services Stake sale, €296m Alpha Bank has sold treasury shares, amounting to 4 percent of
its share capital, for €296 million to Paramount Services Holding
Limited. PSHL is a company representing the business interests of a
prominent family in Qatar.
The Netherlands Deutsche Bank, Fortis, ABN AMRO Acquisition, €709m Fortis, ABN AMRO and Deutsche Bank have signed an agreement by
which Deutsche Bank will acquire from ABN AMRO parts of its
commercial banking activities in the Netherlands for €709 million
in cash. The businesses to be acquired serve over 35,000 commercial
business clients as well as 8,000 private clients and employ 1,400
Italy Banca Monte dei Paschi di Siena, Finsoe Stake sale, €234m Banca Monte dei Paschi di Siena has sold its equity stake in
Finsoe, the company that owns the majority of Unipol Gruppo
Finanziario’s ordinary shares. The stake, 13 percent of Finsoe’s
share capital, was purchased partially by Finsoe itself. The
transaction settlement price totalled €234.4 million. The
Siena-based bank said the deal will result in a Tier-1 benefit of
around 10 basis points.
Denmark Roskilde Bank Bid process Stricken Danish bank Roskilde has reported that preliminary
discussions to find a buyer for the bank have not yet resulted in a
bid, though it added that a number of banks have expressed interest
in taking part in consolidation. According to Reuters, on 11 July
Roskilde requested and received DKK750 million ($158 million) in
liquidity guarantees from Denmark’s central bank, sending its
shares down more than 50 percent. Roskilde said it had realised it
would have to take significantly bigger writedowns than expected in
real estate loans and had put itself up for sale.
UK Royal Bank of Scotland, Zurich Financial Services Bid withdrawal Zurich Financial Services has pulled out of the £7 billion
($13.9 billion) auction for Royal Bank of Scotland’s insurance
business. In a brief statement it said it had carried out “a
detailed review of opportunities” for RBS Insurance but did not say
why it withdrew.
Spain Banco Sabadell, Zurich Financial Services Bancassurance stake sale, €900m Zurich Financial Services is buying the insurance business of
Spain’s Banco Sabadell for up to €900 million ($1.42 billion). The
Swiss insurer will take 50 percent stakes and have management
control of the jointly owned life insurance, pension and general
insurance operations of Sabadell, which will continue to hold the
other 50 percent (see Premium income for Spain’s
Russia Bank Hapoalim, SDM Bank Stake acquisition, $111m Bank Hapoalim has signed an agreement to purchase approximately
78 percent of Moscow-based SDM Bank based on a total company
valuation of $142.5 million, becoming the first Israeli bank to
acquire a Russian bank. SDM Bank, which was established in 1991, is
one of the most profitable private sector banks in Russia in terms
of its return on equity (ROE), says Hapoalim. As of the end of
2007, its assets totalled $632 million and its credit portfolio
$310 million, with an annual average growth rate exceeding 30
percent (in dollar terms) for the years 2004-2007. SDM’s net profit
for 2007 was $15 million, reflecting a return on average equity of
31 percent. The bank operates 12 branches and 30 service centres,
and also has 10 branches in major cities outside Moscow, including
Saint Petersburg. It operates 450 ATMs and serves 120,000 retail
UK HBOS Fundraising, sale rumours Only 8 percent of shareholders in HBOS, the UK’s fourth-largest
banking group and largest mortgage player, took up new shares in
the group’s capital-raising initiative, leaving underwriters Morgan
Stanley and Dresdner Kleinwort with most of the equity still on
their books. HBOS’ share price has fallen by around 75 percent over
the past 12 months, leaving many analysts to suggest the group –
with a market capitalisation of around £15 billion – represents a
good buying opportunity for a foreign bank to enter the UK market.
Media speculation has linked BBVA to a bid; it would not
UK Santander, Alliance & Leicester Acquisition, £1.3bn Santander, Spain’s largest banking group, is to buy the UK’s
seventh-largest bank, Alliance & Leicester. Santander, which
already owns the UK’s Abbey, the country’s sixth-largest player,
valued Alliance & Leicester at £1.3 billion, a premium of 36.4
percent on the share price at which A&L closed at on 11 July.
The deal will add 254 branches to Abbey’s 703. Alliance &
Leicester, focused on savings, loans and mortgages, has been under
pressure in the wake of the global credit crunch and pessimistic
sentiment regarding the health of the UK economy. But it was valued
at around £5 billion in July last year, leading many analysts to
state that Santander has picked up the group for a very fair
UK Barclays Fundraising Barclays’ shareholders took up just 19 percent of new shares in
the UK bank’s fundraising. But Barclays said it had raised £4.5
billion ($9 billion) from major investors in Qatar, Japan, China
and Singapore.
Canada Scotiabank, E*Trade Acquisition, $442m Bank of Nova Scotia (Scotiabank) is expanding its
wealth-management business by buying the Canadian operations of US
online brokerage E*Trade Financial for $442 million in cash.
Scotiabank, Canada’s third-largest bank, said the deal for E*Trade
Canada adds 125,000 active accounts to its books, and doubles its
footprint in the Canadian online investment market.
China United Overseas Bank, Evergrowing Bank Stake acquisition, CNY780m Singapore’s United Overseas Bank has bought a 15.38 percent
stake in China’s Evergrowing Bank for CNY780 million ($114
million), becoming its second largest shareholder.
China Royal Bank of Scotland, Bank of China Strategy update Royal Bank of Scotland has ruled out any sale of its stake in
Bank of China, and intends to press ahead with a two-pronged
Chinese expansion strategy, Gordon Pell, chairman of regional
markets at RBS, told the Financial Times. The value of RBS’s 5
percent stake in BoC has trebled to $4.7 billion since it made the
investment in 2005. But Pell said the bank remained committed to
its relationship with the mainland’s second-largest lender, which
includes formal co-operation agreements in credit cards and wealth
Japan Shinsei Bank,
GE Money
Acquisition, ¥580bn Shinsei Bank has signed an agreement with GE Japan Holdings,
the consumer financial services unit of General Electric, to
acquire GE’s Japanese consumer finance business, GE Consumer
Finance, and its subsidiaries for an all cash consideration of ¥580
billion ($5.34 billion). Shinsei will acquire the total assets of
the personal loan portfolio that operate under the well-established
Lake brand, as well as the credit card and mortgage businesses.
Shinsei said the deal was a “unique strategic opportunity” to add
an experienced, highly-regarded management team and a robust brand
representing 2.2 million new accounts from 1,138 branches and total
loans outstanding of ¥884 billion to its established retail bank
and existing consumer finance platform.
Vietnam Société Générale, Southeast Asia Bank Stake acquisition Vietnam’s SeABank, a top 15 banking group, has secured approval
to sell a 15 percent stake to France’s Société Générale. The
purchase would make the French bank a strategic shareholder in the
Hanoi-based partly private unlisted SeABank, or Southeast Asia
Bank, the statement said. SeABank has total assets of $1.2 billion
and a capital base of VND3 trillion ($182 million).
Source: RBI