Santander Buys Banco Popular After ECB Determined Rival Was 'Likely to Fail'

By Jeannette Neumann Features Dow Jones Newswires

Banco Santander SA has acquired Banco Popular Español SA in an overnight auction for the notional amount of EUR1 ($1.13) after the European Central Bank determined that Spain's No. 6 bank by assets was "failing or likely to fail."

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Santander said it planned to raise EUR7 billion in a rights issue to fund a cleanup of Banco Popular's balance sheet.

While Spain's major lenders are on stable financial footing, Banco Popular has been the weak link, with a balance sheet weighed down by around EUR37 billion in foreclosures and other nonperforming assets accumulated when the country's real-estate boom went bust. The bank's share price has plummeted more than 50% in the past week alone on investor concerns it wouldn't be able to sell assets, raise capital or find a buyer.

"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 in a press release on Wednesday. "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 Español S.A. to Banco Santander."

Write to Jeannette Neumann at jeannette.neumann@wsj.com

(END) Dow Jones Newswires

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June 07, 2017 03:10 ET (07:10 GMT)