June 8, 2017 3:18 pm

Santander acquires crisis-ridden Banco Popular

Spain’s largest Bank Santander announced on Wednesday the acquisition of the crisis-ridden Banco Popular Español for a payment of 1 EUR. Banco Popular got into financial distress struggling to reduce its large stocks of non-performing loans of 35 billion euro. The much more important news on this takeover is that for the first time European Central Bank (ECB) and Single Resolution Board (SRB) – after “taking into account the rapidly deteriorating liquidity situation of the Institution (Banco Popular) ” and considering “that there were sufficient grounds supporting the determination that the Institution would, in the near future, be unable to pay its debts as they fall due” – applied the recently adopted Bail-in-rules i.e. the creditors’ participation in European Bank Restructuring.
Creditors’cash check
Banco Popular’s Creditors had on their part to accept the write-down of their shares and convertible bonds as the institution was “failing or likely to fail” and the target of SRB’s decision was to “effectively protect the depositors of Banco Popular and its critical functions to avoid adverse effects on financial stability and the real economy (in Spain and Portugal), without using any public funds.”
Elke König, Chair of the SRB, stated: “The decision […] safeguards the depositors and critical functions of Banco Popular. This shows that the tools given to resolution authorities after the crisis are effective to protect taxpayers’ money from bailing out banks.”
Santander announces capital increase
In order to shoulder the cost of Banco Popular’s acquisition and in particular to handle the “inherited” portfolio of NPLs, Santander CEO Ana Botín announced a capital increase of 7 billion euro as well as the raise of capital reserves by 7.9 billion euro to back up non-performing loans.
Despite these obstacles she appeared confident that Santander would meet its self-imposed target of a Common Equity Tier 1 (CET1) of more than 11 percent in 2018. Botìn also emphasized that Santander would drive forward its role as the leading financer of small and medium-sized companies of the Iberian Peninsula holding by the end of 2016 a SME market share of 11,1 percent (Banco Popular: 13,8 percent).
Santander CEO finally reaffirmed the willingness to achieve a return on investment (ROI) of between 13 and 14 percent in 2020 and an increase of earnings per share in 2019.
Debitos speeds up divestiture processes
The intervention of ECB and SRB as European monetary authorities gave for the first time shape to the Bail-in-rules of the euro zone showing how taxpayers’ and depositor’ joy can quickly turn into shareholders’ sorrow. As Banco Popular missed the opportunity to reduce its non-performing portfolio in a cost-saving and efficient way, other banks still have the chance do to so – best by joining our Debitos plattform as the leading pan European secondary debt market.
Our platform offers market-oriented NPL divestiture processes that are perfectly in line with market conditions. More than 40 European banks already benefit from the fully digitalized NPL divestiture processes that offer transparency, significantly lower costs in reducing non-performing loan books, the free indicative valuation of bad debts, the reduction of the internal complexity of co-ordination and the maximization of revenues by simultaneous addressing more than 420 qualified investors.
The unrivalled speed of Debitos’ auctions reveals to be another crucial advantage as every single auction process – due diligence, valuation and pricing – is directly portrayed over our online platform.
Please consult the above cited spurces for further information to our article:
Bloomberg online:

Single Resolution Board (SRB) Press Release:

Grupo Santander Press Release:

This post was written by Marcello Buzzanca

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(Image rights: istockphoto.com/trenchcoates)

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