Santander Bank, through an official notice directed to Comisión Nacional del Mercado de Valores (National Securities Market Commission) announced the 100% acquisition of the Banco Popular as the result of the competitive sale process organized within the framework of a resolution plan that was adopted by the single Resolution Board and executed by the Fund for Orderly Bank Restructuring (FORB.)
Recently, Banco Popular suffered heavy falls, about – 54% in the last five sessions and so far 79.5% in 2017, which fastened the intervention. To this day the shares were suspended from quotation.
As part of the execution, Banco Popular received full repayment of all shares and the resulting actions of the conversion of Additional Tier 1 regulatory capital instruments issued by the Bank in question.
In addition, there was the conversion of all of the Tier 2 regulatory capital, which was issued by the bank in one newly issued share of Banco Popular, all of these were acquired by Banco Santander for just one euro.
On the other hand, Santander announced that it has scheduled to make a capital increase of more than 7 billion euros, this will be approximately 6% of its stock market value which will also cover capital and provisions required to strengthen the balance sheet of Banco Popular, so that it rises the real estate exposure coverage up to 69%, well above 52% average of the sectors. This will be done on July.
The goal is to reduce the assets that are not productive to non-relevant levels in three years. The current actions of the buying bank shall have a preferential subscription right in the increase of said capital. After the operations, it’s expected for the impact of CET1 capital to be completely neutral.
Santander Bank foresees that Banco Popular can achieve a net profit of 950 million in the year 2020 including synergies of the annual costs of 500 million until 2020, this will be an estimated 10% combined costs of 2017 and also an improvement of the efficiency ratio from 10% to 50%.
This result includes an annual average growth of the net benefit with the synergies 25/30% for the period ranging from 2018 to 2020 and also a ROI of 13/14%, well above the current capital cost, for which the operation will create value starting from 2019; it’s expected to be 2% in 2019 and 3% in 2020.
Thus, Santander Bank has become the leader of commercial banks in Spain and Portugal, as well as adding a 6-7% of the market share in Spain and 2% in Portugal. The combined Bank could reach the 25% share in SMEs, leaving it clear as a leader above the second competitor by more than 13%.