(13 June 2017 – Spain) Spanish bank Santander will acquire smaller rival Banco Popular which has suffered a sharp fall in its share price in the last week over fears about its liquidity situation.
In a statement, Santander said it would take over 100 percent of Banco’s shares and debt at a symbolic price of €1 and carry out its own €7 billion share-raising to “cover the capital and the provisions required to reinforce the balance sheet of Banco Popular”.
The Spanish bank added the deal would have a “neutral” impact on its core capital ratio (CET1).
Banco’s share price halved in value over the last week, driven by concerns the lender is running short of time to raise capital, after a series of bidders reportedly dropped out of an auction to buy it up.
The European Central Bank (ECB) issued a statement saying Banco was “failing or likely to fail”.
The ECB, which is responsible for supervising the eurozone’s largest banks, said it had warned the body charged with winding down failing banks, the Single Resolution Board, of its assessment on Tuesday.
“The significant deterioration of the liquidity situation of the bank in recent days led to a determination that the entity would have, in the near future, been unable to pay its debts or other liabilities as they fell due,” the ECB said.
“Consequently, the ECB determined that the bank was failing or likely to fail and duly informed the Single Resolution Board (SRB), which adopted a resolution scheme entailing the sale of Banco Popular Español S.A. to Banco Santander.”
Additionally, the European Commission approved the deal noting the takeover would mean “customers of Banco Popular will continue to be served with no disruption to the economy”.
“All depositors continue to have uninterrupted access to the full amount of their deposits”, said Brussels.
Santander said the deal would create Spain’s largest bank by lending and by assets and boast 17 million customers with 4 million in neighbouring Portugal.
According to reports, the acquisition significantly strengthens the Santander’s footprint in lending to small and medium-sized enterprises (SMEs).
Popular’s SME franchise has long been viewed as the strongest in Spain. Santander said the combined group would enjoy a 25 percent market share in SME lending in Spain.
“The combination of Santander and Popular strengthens the group’s geographical diversification at a time of improving economic conditions in both Spain and Portugal,” Ana Botín, the bank’s chairman, said in a statement.