CAM on the edge as markets estimate 5,000 million Euros needed to keep it afloat 6217 

CAM bank is closer than ever to nationalisation as the stock market assumes that nationalization is an unavoidable step for the sale of one of Spain's largest savings banks. The financial press said on Monday that the government has estimated that the caja needs at least 5,000 million euros in capital to stay afloat.

The stock market has reacted harshly, with stocks in CAM dropping by 9,5% in early Monday morning trading on the Madrid stock exchange. Heavy losses last week were compensated by a strong purchasing wave of CAM stocks that many believe were financed by the bank itself, attempting to prop up it's own stocks.

The Caja is currently up for sale or merger in an attempt to prevent it from collapsing, but it was confirmed last week that a series of negotiations with other financial institutions have ended unless the government underwrites the bad assets of the savings bank.

The situation of the institution, which announced on Friday that it needs 2,800 million euros in public capital, raises many uncertainties for the rest of Spanish banks. The industry is concerned about the effect this may have for a prolonged crisis, without a quick fix, on the financial sector with foreign investors in Spain, at a time when many banks are going to have to seek capital on the international markets.

CAM represents 5.5% of sector assets, three times more than CCM-nationalised in 2009 - and four times more than Cajasur-nationalised in 2010 -.

Financial sources estimate that up to 5,000 million of public money would be needed to clean up the caja before it can be sold to another entity.

Emergency nationalisation needed now, say financial experts

The financial regulator will hold this week several technical meetings with the directors of CAM, which will raise the specter of a joint aid plan, which limits the entrance of the State to a minority of the capital. Thus, the current management would remain in their positions.

There has already been a 1.745 million euro request in the form of capital (which gives political rights to the public sector on the board of CAM, in a scheme called Frob 2) and 1,055 million in financing (the amount that corresponded to the committed support to Banco Base through the Frob 1 scheme), as announced last week. This approach has created astonishment in the financial system over the weekend, with influential finance paper Expansion calling for the national bank to force a full nationalization of the Caja immediately to prevent a "dripping approach" to funds.

According to sources, the takeover by the state is an essential step to sell assets of the fund to other entities. "No bank is going to take over its assets, if the Bank of Spain has not previously taken the management of the company," according to sources familiar with the process. CAM has been sent to institutions such as Santander, BBVA, La Caixa, Sabadell and Popular notebook sales. The best position is Santander. However, it seems difficult to close an operation in the coming days.

One of the scenarios raised by the entities that are interested in acquiring CAM is that the Bank of Spain nationalises CAM, performs an audit of assets and then sells the core business to another strong entity, ensuring future losses are protected against with an Asset Protection Scheme (PPS). This insurance should cover potential losses by up to 9,000 million, according to the sources.

Decision by April 14

The Bank of Spain has said that the nationalization of CAM will be approved within the same limits as those of other banks with weak capital. Therefore, the supervisor has until April 14 to approve the new aid scheme and the entity until April 28 to seek approval of its board.

CAM was badly damaged last week after its ex-partners (Cajastur, Extremadura and Cantabria) broke the SIP that united them, leaving it to confront heavy exposures by itself.

The entity has a balance weakened by its real estate exposure (10,000 million euros in unpaid debt), its high default rate (8.7%) and a heavy drop in core business, down 55% from 2010 levels.

Reuters - MADRID, April 4 | Mon Apr 4, 2011 6:36pm EDT

Caja de Ahorros del Mediterraneo (CAM) dropped for a fourth day, losing 8.8 percent to 5.61 euros. The Bank of Spain has contacted several smaller Spanish lenders to find a buyer for Caja de Ahorros del Mediterraneo, known as CAM, after Spain’s largest banks showed little interest in the caja, El Confidencial reported.

The Spanish savings bank will seek 2.8 billion euros ($4 billion) from a state rescue fund after the collapse of a planned merger.

Reuters - MADRID, April 5 | Tue Apr 5, 2011 2:36am EDT

Troubled savings bank CAM is negotiating with the Bank of Spain to allow an investor to enter into its capital alongside public funds, to avoid total nationalisation, Expansion reported on Tuesday.

CAM has repossessed real estate assets worth 3.5 billion euros ($5 billion) on its balance sheet, Cinco Dias reported citing sources close to the bank.