Thursday, August 20, 2009

Spanish banking giant acquires Guaranty Bank

On Friday August 21, Spanish banking giant BBVA acquired Texas based Guaranty Bank, in a federally brokered deal. After being closed on Friday and Saturday, Guaranty branches in Texas and California should reopen under the new name BBVA Compass, an Alabama based subsidiary of BBVA based in Madrid.

Guaranty had $13.5 billion in assets as of June 30, 2009 but bad loans caused Guaranty to take substantial write-downs on some assets, making it, as the company announced in July, "critically undercapitalized."

Acquiring bank BBVA employs 112,000 people and serves 47 million customers in more than 30 countries. It is Spain's No. 2 bank by stock market value and reportedly has $750 billion in assets. It is also Mexico's largest bank.

BBVA Chairman and CEO Francisco Gonzalez has aggressively pushed to expand his bank's presence in the United States, acquiring Compass Bancshares Inc. in 2007 for $9.6 billion and rebranding it as BBVA Compass. BBVA Compass has 583 branches in Texas, Alabama, Arizona, Florida, Colorado and New Mexico.

The Guaranty deal expands BBVA presence in California, something CEO Gonzalez has long wanted, but would lead to branch consolidation in Texas because of existing overlap with BBVA Compass.

BBVA is known in international banking circles for its "risk averse" and cautious culture, sticking to the unglamorous business of taking deposits and making loans. Largely because of that BBVA has avoided the brunt of the global financial crisis, allowing it to continue its expansion in the United States.

A formal announcement regarding BBVA's takeover of Guaranty should be made later this week.

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