2017-06-07 05:56:02
Santander to Take Over Troubled Lender Banco Popular

LONDON — Banco Santander said on Wednesday that it would take over another Spanish lender, the troubled Banco Popular, in a rescue that will test the system Europe created in the wake of the global financial crisis to limit the damage from bank collapses.

Santander, one of Europe’s largest banks, said it would pay a symbolic amount of 1 euro for the bank and would raise an additional €7 billion, or about $7.9 billion, to bolster Banco Popular’s balance sheet.

The rescue is the first in which the European Central Bank has determined that a eurozone lender has failed or is about to fail. The central bank assumed authority over eurozone banks in 2014 as part of changes intended to prevent banking crises like that of 2008.

The central bank said that it had determined on Tuesday that Banco Popular was “failing or likely to fail.”

Shares of Banco Popular have dropped more than half in the past week over concerns that the bank would need additional capital as it struggled under the weight of billions of euros in bad real estate loans.

“We welcome Banco Popular’s customers as part of the Santander Group and will work hard to continue serving them at the highest standards through the transition and beyond,” Ana Botín, the executive chairwoman of Santander, said in a news release.

“The combination of Santander and Popular strengthens the group’s geographic diversification at a time of improving economic conditions in both Spain and Portugal, and will allow us to continue to deliver for customers and shareholders on all of our commitments,” she added.

To bring Banco Popular’s balance sheet in line, Santander said it would make additional provisions for nonperforming assets of €7.9 billion, including €7.2 billion for real estate.

Santander said it expected to reduce Banco Popular’s real estate exposure significantly, as Santander has done with its own operations in recent years.

“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 European Central Bank said.

The central bank said it contacted the Single Resolution Board, which is responsible for handling the winding down of banks that fail. The board adopted a plan to sell Banco Popular to Santander.

The combined business of Banco Popular and Santander will be led by the current management team of Santander Spain with Rami Aboukhair as chief executive, Santander said.