Financial Times


March 30, 2014 10:05 pm

Winners emerge after years in the financial wilderness

By Miles Johnson

Caixabank©AFP

Winning formula: CaixaBank has distanced itself from its weaker rivals

Over the years the long standing rivalry between Barcelona and Madrid, Spain’s two largest cities, has been fought on many fronts.

While the Spanish capital stands as the country’s centre of political power, Barcelona’s supporters have pointed to the city’s greater international influence in cultural areas such as food, music and tourism.

On the football field, where this inter-city rivalry is each season transposed into the individual battles between players such as Cristiano Ronaldo and Lionel Messi, Real Madrid and FC Barcelona have not only dominated their domestic league, but are at the top table of international competition.

Away from gourmet kitchens, music festivals and “clasicos” (the name given to games between Real Madrid and Barcelona) one of the most important aspects of this rivalry has been the two cities’ relative economic power, and their competing desires to be centres of international business and finance.

Madrid is often assumed to be the country’s centre of business, and the most likely location for any international companies looking to open in Spain. Yet over the past two decades Barcelona has increasingly focused on using its strong international brand and large local financial sector to prove it can offer more to foreign investors than tourism and football.

As Spain begins to emerge from its traumatic property and banking collapse, several leading companies appear to have strengthened their position as competition elsewhere has faded. The Barcelona-based CaixaBank, the largest bank in Spain by domestic assets, has emerged as one of the winners from the demise of the majority of the country’s savings banks, or cajas, which before the global financial crisis lent recklessly to real estate developers and were subsequently nationalised.

CaixaBank, which traces its roots to a 1990 merger of two savings banks, one dating back to 1904 and the other to 1844, was one of the first former Cajas to list itself on the stock market during the crisis, helping it to distance itself from its weaker rivals, and take advantage by buying up struggling banks across Spain. The lender, which is controlled by its foundation La Caixa, has also exemplified Barcelona’s influence across Spanish business through its vast network of shareholdings in other companies, such as Telefónica and Repsol.

International companies across various sectors have also opted to invest in Barcelona, from Hewlett-Packard, which has a large commercial office in the city, to the private equity investor Carlyle, which was one of the first international financial institutions to base its Spanish operations there. Several companies that are looking to sell their shares to international investors as part of a listing on the Spanish stock market this year are also based in Barcelona. If they are successful they would join only a handful of companies that have listed in Spain since the crisis.

The online travel agency EDreams Odigeo, owned by the private equity companies Permira and Ardian, is seeking to achieve a valuation of about €1.5bn, including debt. Another company based near Barcelona that plans an initial public offering this year is Applus, an industrial testing company owned by Carlyle. Other areas of strength include Barcelona’s clothing and fashion industries, with global brands such as Mango and Desigual, which recently sold a stake to the French investment group Eurazeo to give the privately held company an enterprise value of €2.7bn.

But while the crisis has helped strengthen some of Barcelona’s leading businesses, the resultant up-surge in Catalan nationalist sentiment, with the region’s leader Artur Mas pledging to hold a referendum on breaking away from Spain, has increased uncertainty.

Politicians in Madrid have frequently used the prospect of a flight of international capital from Catalonia, and the damage this would inflict on the region’s businesses, as a reason why the vote, which the Spanish government argues is unconstitutional, should not take place.

Meanwhile, for large businesses in Barcelona and their executives, the debate over the vote and the merits for Catalonia of splitting away from Spain has risked dragging them into a divisive political debate.

Many have opted to avoid speaking on the issue in any form in public as a result. Other business leaders have been more outspoken. José Manuel Lara, chairman of the publisher Grupo Planeta, said he would shift the company’s headquarters away from Barcelona to Madrid if the region chose to become independent.

Isidro Fainé, executive chairman of CaixaBank, earlier this year broke his silence on the issue of independence, arguing that a “grand pact” has to be forged by Mariano Rajoy, Spain’s prime minister, and Mr Mas in order to resolve the situation.

Mr Fainé, like the heads of many of Catalonia’s larger businesses, must contend with keeping both politicians and clients in the region happy, but not alienating their equivalents in other parts of Spain, where CaixaBank has more than two-thirds of its branches.

Up to now it does not appear that foreign investors are overly worried by the possibility of Catalonia breaking away from Spain, and Barcelona continues to enjoy its status as an attractive city to do business.

However, in spite of their recent gains, the region’s large businesses are anxiously eyeing the polls, and making contingency plans. The next year, for residents and international businesses based there, could be one of the most important in Barcelona’s history.