While Bankia and CaixaBank begin to negotiate their merger, as both informed the market last Thursday, the name of the two entities follows in parallel a series of judicial appointments that appear on the near horizon. The two great heirs of the savings banks still have on the agenda some cases opened in the courts related to the excesses in the management of those groups, as well as the practices that have been indicated in the courts in the commercialization of some mortgages. In this way, some repercussions can be foreseen in the future for two financial groups that are already focused on negotiating the creation of the largest financial institution in the country.
The State loses control of Bankia in the merger with CaixaBank and paves its future exit without recovering the aid
Analysts are not oblivious to this fact and the analysis house Moody’s itself pointed out this week in its assessment of the merger, the impact of the legal cases, specifically pointing to Bankia. Specifically, it pointed to the IPO of the entity, which the National Court has judged during the past year and which is awaiting the sentence. “The bank is currently facing several legal processes related mainly to the IPO initiated by some institutional investors, but also a criminal process in the national court – National Court – and that have an uncertain impact for the entity,” says Moody’s in the note . “Bankia believes that its provisions will be sufficient to face this risk, but recognizes that new provisions may be needed depending on the claims it receives,” she emphasizes.
Moody’s refers to one of the main judgments about the management of the old savings banks. Specifically, the Bankia case investigated the management made by the former administrators of the bank, as a result of the merger of several savings banks, and which ended up being rescued after a disastrous IPO. Thirty-four former directors and former councilors passed through the dock, led by the appointed principal, his former president Rodrigo Rato. In the next few weeks it will be a year since the trial was seen for sentence in the National Court.
In the long list of defendants led by the former vice president of the Government and former director of the IMF, there were also José Luis Olivas, former president of Bancaja and vice president of Bankia after the merger; the former CEO Francisco Verdú; o José Manuel Fernández Norniella, director of Caja Madrid and later of Bankia. But there are also old acquaintances like Arturo Fernández, Javier López Madrid, Ángel Acebes or José Antonio Moral Santín. As far as the current financial institution is concerned, the defendants include a current manager, the comptroller general Sergio Durá, and the financial group itself, which the popular prosecution accused of scamming investors.
CaixaBank, for its part, absorbed another of the rescued entities whose management has led the most court cases: Banco de Valencia. Although, in the cases that affect the administrators of the disappeared group, the Catalan bank is not liable, which took over the financial company for one euro after its reorganization. The bank’s former CEO, Domingo Parra, was convicted in January for unfair administration, forcing him and other convicts to return 93 million to the FROB. Parra faces, together with José Luis Olivas, also accused in the Bankia case, another trial for accounting falsehood.
However, among the cases filed around Banco de Valencia, there is one that directly affects CaixaBank. The Catalan entity was sued in 2017 in a court of first instance in Valencia by the company Nibema, a former shareholder of Banco de Valencia, for the process that culminated in the award of the rescued bank to CaixaBank for one euro. This company presented a report from the University of Valencia in which it doubted that the capital injection made in the rescued group was the correct one and, therefore, requested the Catalan bank 3.6 million when understanding that Banco de Valencia was worth much more than the euro for which it was awarded to CaixaBank.
The IRPH, awaiting the Supreme Court
But the headache may come for both entities this month. The Supreme Court plans to rule on pending claims on the IRPH, a mortgage index used as an alternative to Euribor and that Following a European ruling, the courts must rule on whether they were traded transparently. Your opinion should serve for all consumer complaints that are receiving mixed results.
Explains Patricia Suárez, from Asufin, that the organization is mostly obtaining favorable sentences for the client in the courts of first instance but not so much in the provincial hearings, for that reason she understands that this sentence, which will refer specifically to some 15 appeals, can indicate the future of these court cases. Also, remember that CaixaBank and, to a lesser extent, Bankia are two of the entities most exposed by the use of this index.
“Both are heirs to many of the old savings banks, which were the ones that referenced mortgages to this index,” he says. According to data from this association, around one million mortgages in force in Spain have been linked to an interest rate that ended up being more expensive than Euribor. Specifically, CaixaBank is the bank with the highest share of these mortgages, with 24% of the total, according to this organization’s estimates.
If you add the 10% quota that would be around Bankia, the result is that the new bank that emerged after the merger would concentrate one out of every three mortgage contracts referenced to the IRPH. According to the data provided by the entities themselves last year, there are 8,000 million euros in mortgages with IRPH. Asufin has two open class action lawsuits against these entities and considers that this will be the main legal headache in the future of the two financial groups that are now seeking to merge.
Both companies detailed this risk in their 2019 financial reports, where they analyzed the risks that a judgment contrary to their interests by the European justice would be detrimental to their accounts. However, the opinion of the CJEU left the ball on the roof of the national courts.
In the aforementioned accounts, these entities detail other cases that they have open in court. In the case of the rescued group, the effects that claims on mortgage expenses may have on its balance sheet are also pointed out, as well as other causes related to the commercialization of what are known as floor clauses. With regard to CaixaBank, its accounts for 2019 point out the investigation opened in 2018 by the Anticorruption Prosecutor’s Office, which initiated actions against the bank, the former head of regulatory compliance of the entity and eleven employees for an alleged offense of money laundering that affected ten of its branches by Chinese mafia organizations involved in operations such as Emperor. The Catalan group points out that this case is still in the investigation phase.