Banco Bilbao Vizcaya Argentaria (BBVA) has won an auction to buy nationalised Spanish lender Catalunya Banc in a further clean-up of the country’s beleaguered banking sector.

Banco Bilbao Vizcaya Argentaria (BBVA) has won an auction to buy nationalised Spanish lender Catalunya Banc in a further clean-up of the country’s beleaguered banking sector.

Spain's second-largest bank by market capitalisation offered to pay €1.2 bn for Catalunya Banc, outbidding rival contenders Santander and Caixabank, Spain's banking restructuring fund FROB said.

The sale follows a difficult auction process for Catalunya, which saw the state having to inject more public money into the lender than initially expected to attract bidders.

Based in the northeastern region of Catalonia, Catalunya Banc was formed from the merger of three smaller savings banks, or cajas, that were hit hard by the 2008 bursting of Spain’s construction bubble.

Crippled by bad property loans, Catalunya was nationalised and ended up receiving €12 bn of state aid.

The sale of Catalunya comes hard on the heels of the news last week that US asset management giant Blackstone is buying the bank’s €6.4 bn 'Hercules' portfolio of Spanish residential non-performing loans.

Blackstone is believed to be paying €3.6 bn for the package, outbidding a rival offer tabled by Oaktree along with Pimco, Deutsche Bank, Marathon and Finsolutia. The price would mark a discount of 44%.