The bank bought with 1 euro
Spanish banking giant Banco Santander will buy Banco Popular Espanol, one of the largest banks in the Spanish banking system, for only one euro, according to Bloomberg. Santander wants to raise 7 billion euros through a rights offer , with which it should secure financial stability.
Popular didn’t manage to repair its huge holes in the balance sheet after struggling with non-performing mortgage loans since the real estate boom in 2008, ahead of Spain’s property crash.
Last week, the bank’s shares collapsed by nearly 40%. On Tuesday, the titles began to fall sharply, but quickly recovered a few minutes later, and then resumed their decline, despite a seemingly favorable conclusion between bank managers and ECB officials.
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The evolution of CDSs, insurance instruments against insolvency risk, suggests that investors are afraid of the bank’s “life” in the short run.
Popular reached only 1.3 billion euros in capitalisation, 63% lower than the beginning of the year.
The transaction will generate a return on investment of 13 percent to 14 percent in 2020 and add to earnings per share by 2019, Santander said. The bank may also be able to reap the benefit of Popular’s valuable business lending to small and medium-sized companies once the clean-up of its soured assets is complete.
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