Spain's Banco Santander acquires failing Banco Popular

Santander said it planned to raise EUR7 billion in a rights issue before the end of summer to fund a cleanup of Banco Popular's balance sheet.

European Union regulators arranged for Spain's biggest bank, Santander, to take over Banco Popular, but only after wiping out the investments of the troubled lender's shareholders and junior creditors - a move welcomed by financial markets which saw it as a possible template for other European Union banking crises.

It marks a departure from the practice of using taxpayers' money, rather than imposing steep losses on shareholders and some creditors of the bank. "Had Saracho known about the complexity of Popular's situation, he probably would not have accepted the job". Axiom International Investors LLC DE now owns 46,310 shares of the bank's stock worth $1,013,000 after buying an additional 182 shares in the last quarter. The current share price indicate that stock is -29.47% away from its one year high and is moving 4.46% ahead of its 52-week low.

Santander said that the deal would not materially affect the Santander's financial health and that it expected to generate returns on its investment of 13-14 percent in 2020. The integration of Santander and Popular will significantly enhance Santander's franchises in both Spain and Portugal.

Santander said the aquisition will make it Spain's largest bank in terms of assets and lending, with 17 million customers.

Some buy side analysts are also providing their Analysis on Banco Santander, S.A., where 0 analysts have rated the stock as Strong buy, 0 analysts have given a Buy signal, 0 said it's a HOLD, 1 reported it as Underperform and 0 analysts rated the stock as Sell.

"This shouldn't pose any real problems for other banks", Aberdeen Asset Management Head of Credit Research Laurent Frings said.

"This is really great news for Europe, for the financial system, for Spain, and for Santander's shareholders".

"Maybe tomorrow's European Central Bank meeting sees nothing but platitudes and disappoints a market that is getting ahead of itself", said Societe Generale analyst Kit Juckes, "But (for us) that would be a huge euro buying opportunity, because European Central Bank normalisation IS coming". That will take coverage for real estate and property-linked NPAs to 69 percent from 45 percent.

This also impacted the share price of Santander which suffered downfall in their share prices by 3.4 percent before they started trading in the market at price of lower than the earlier price by 0.3 percent.

"Consequently, the ECB determined that the bank was failing or likely to fail and duly informed the Single Resolution Board, which adopted a resolution scheme entailing the sale of Banco Popular to Banco Santander". But the capital increase had looked increasingly doubtful in recent days. Zacks Investment Research cut Banco Santander-Chile from a "buy" rating to a "hold" rating in a research report on Monday.

  • Zachary Reyes