Investment bankers in Spain are asking themselves where their next $500 million is coming from. That is at least how much they have earned so far from the sell-off of Spanish state assets. The programme ranks as the fifth-biggest in the OECD after the UK, Italy, France and Australia, with the Spanish state collecting Pta1.8 trillion ($11 billion) in privatization receipts.
This year the elephant transactions will virtually come to a halt, with the disposal of large stakes in national grid Red Eléctrica, defence electronics group Indra and Iberia airlines, together worth perhaps $2 billion. On the face of it the outlook would seem a bit alarming for the banks: how to justify and continue paying for all those expensive investment bankers and research analysts who were put in place when things were so buoyant, and in an overcrowded market where in the past state privatization agency Sepi would invite 30 banks or more to bid for mandates.
For most bankers the answer is a shift in strategy - a focus on smaller private transactions offering more lucrative fees. "It's going to be a tougher environment, particularly for those of us who were most active in the heyday of the privatization programme," says Enrique Casanueva, managing director and head of corporate finance at Santander Investment.