Spain's savings banks are struggling to attract private capital ahead of Monday's deadline to present plans to the Bank of Spain detailing how they will boost capital reserves in line with tough new minimum levels.
The only private investors to have offered to invest in the regional savings banks, or "cajas", have been sovereign wealth funds from Qatar and Abu Dhabi. Norway's central bank said on Saturday it was looking to invest in smaller Spanish banks.
Spain's Socialist government, battling to prevent becoming the biggest euro zone state to need an international bail-out, has demanded savings banks boost their capital reserves to ward off concerns about the stability of the financial system.
The government has ordered the unlisted cajas to get private capital on board by stock market listings or equity investment or face nationalisation.
Many US private equity funds have run valuations on the savings banks.
"There's a lot of foreign interest in the cajas, particularly from hedge funds, and they've done their homework. But they're not willing to pay any price," said a financial source familar with the matter.
Venture capitalists are wary of real estate assets and developer loans sitting on balance sheets after a decade-long housing boom which turned to bust around three years ago.
"The logical move from an investor's point of view is, if you have concerns about what is on the balance sheet and its future performance, you ask for a reduction in price," said Francisco Uria, partner at KPMG, Spain.
The conflict on price is not easy to resolve, said Uria, despite cajas' flexibility on price given they do not have owners or shareholders.
"The real situation is that nobody wants to sell in bad conditions," he said.
The Spanish savings bank association (CECA) has toured Asia and the Middle East in search of promises of investment from private investors such as oil-rich sovereign wealth funds.
CECA Managing Director Jorge Gil told Reuters in Kuwait during the Middle East roadshow he was "tremendously confident" the unlisted banks would get concrete offers of investment, but few have been forthcoming.
Qatar promised 300 million euros ($425 million) of investment for the savings banks in February and Abu Dhabi has said it will invest 150 million euros in one unnamed savings bank. Norway has not put a figure on its planned investment.
It all amounts to a drop in the ocean of the 15 billion euro funding shortfall of the Spanish banking sector, as estimated by the Bank of Spain.
Credit rating agency Moody's estimates the shortfall could be as much as 50 billion euros if future losses on real estate are included.
Barcelona-based La Caixa and the largest savings bank Bankia have both said they plan stock market listings, as has Banca Civica, a small bank resulting from the merger of savings banks from northern regions and the Canary Islands.
The last resort for banks that fail to get private capital on board or get a listing underway is to apply for a capital injection from the state restructuring fund. The state fund, or FROB, will buy shares in banks that apply for state help.
The FROB can keep the shares for up to five years, with an option for the savings banks to buy them back within the first two years provided the government makes a profit on the sale.
The intervention of the state will be temporary, the government says, and will not have any impact on Spain's deficit. Spain is seeking to slash its burgeoning deficit in line with European Union (EU) rules.
Spain must decide how to value the shares in the savings banks. Evolution Securities says they should not do so at more than 0.7 times book value.
"Accepting valuations close to book would not only lack fundamental justification," said Evolution Securities analyst Arturo de Frias. "It could also risk destroying some of the invaluable credibility gained with recent structural reforms."
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