Five days ago the Telegraph reported Santander Buys Struggling Spanish Bank Popular for €1.
The Article called it a “watershed deal masterminded by EU regulators to avoid a damaging collapse.”
Reality is quite a bit different as two more Spanish banks are in serious trouble.
First, let’s finish some details about Banco Popular from the Telegraph article.
Santander will tap its shareholders for €7bn in a rights issue to raise the capital needed to shore-up Popular’s finances in a dramatic private sector rescue of Spain’s sixth-largest lender. It will inflict losses of approximately €3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout.
The last-ditch Popular rescue is significant because it marks the first big test of the Single Resolution Board (SRB), the Brussels body that was established two and a half years ago to deal with banking meltdowns in a way that shields taxpayers.
There has been growing concern about loss-making Popular amid fears it would collapse under €37bn of bad property loans it has made. Customers have been withdrawing deposits in a run that has seen billions of euros pulled in recent weeks.
With Popular’s position looking increasingly precarious, the European Central Bank decided overnight that the lender was “failing or likely to fail” and called in the SRB, which orchestrated the forced sale to Santander.
Liberbank and Unicaja Hit by Contagion
CityAM reports Investors wary of Spanish banks Liberbank and Unicaja after Banco Popular troubles.
Liberbank’s share price fell 41 percent to €0.68 (60p) last week, as Santander rescued Popular by buying its rival for a nominal €1.
Meanwhile, the initial public offering (IPO) of Andalusia lender Unicaja, due this summer, could also be hit.
The Sunday Times reported that Liberbank, which was formed in 2011 by the merger of three failed savings banks, had seen the value of its riskiest bonds collapse by 60 percent in recent days.
Leave A Comment