Spain's Banco Santander acquires failing Banco Popular

Spain's Banco Santander acquires failing Banco Popular

Banco Santander-Chile earned a media sentiment score of 0.31 on Alpha One's scale.

It was the first time such a decision has been taken since the European Central Bank took over the role as Europe's banking supervisory authority in November 2014.

The ECB had blamed what it called a "significant deterioration of the liquidity situation of the bank in recent days" in concluding that it "would have, in the near future, been unable to pay its debts or other liabilities".

"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 Santander".

- European authorities on June 7 stepped in to avert a collapse of Spain's Banco Popular, following a run on the bank, orchestrating a last-minute rescue by Santander. JPMorgan Chase & Co. upgraded shares of Banco Santander Brasil SA from an "underweight" rating to a "neutral" rating and boosted their target price for the stock from $6.00 to $7.50 in a report on Friday, May 19th.

Also on Tuesday, global rating agency Moody's downgraded Banco's unsecured debt and deposit rating.

"This deal is good for Spain and it's good for Europe", Santander chairman Ana Botin said of the agreement, which breaks the mold of using taxpayers' money, instead imposing losses on shareholders and creditors of the bank.

"We welcome Banco Popular customers", she said.

Analysts estimated that Banco needed between three billion euros and five billion euros in fresh capital after unveiling a 3.5 billion euro loss for its last financial year.

The Spanish lender thus became the lowest-value entity on the Madrid stock exchange's main Ibex 35 index, at around 1.4 billion euros in market capitalization. Generation Investment Management Llp sold 39,336 shares as Banco Santander Chile New (BSAC)'s stock rose 10.93%.

As a result, it would be sold to Banco Santander. The deal will strengthen Santander's position in lending to small and medium sized enterprises (SME). As part of the transaction Santander will complete a rights issue for a total amount of € 7 billion.

Spanish Economy Minister Luis de Guindos said Santander's takeover was a good outcome for Popular given its situation in recent weeks and it would have no impact on public resources or other banks.

Popular reported a €3.5bn loss past year as it continued to tackle nearly US$40bn of toxic property loans.

The head of the Regional Banking Group for Regions Bank, John Owen said, "Every day Regions associates are focused on helping consumers meet their financial goals and improving their banking experience by providing the best tools and advice while also maintaining strong safeguards against fraud". After $0.18 actual earnings per share reported by Howard Bancorp Inc for the previous quarter, Wall Street now forecasts 27.78% EPS growth.