Santander Launches $8.04 Billion Stock Sale to Finance Banco Popular Acquisition

By Jeannette Neumann Features Dow Jones Newswires

Banco Santander SA launched a 7.1 billion euros ($8.04 billion) stock sale to finance its clean-up of troubled lender Banco Popular Espanol SA, which it took over last month during a central bank-orchestrated rescue.

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Santander executives had said they would issue roughly that amount when the bank bought Banco Popular for a nominal one euro on June 7. The capital increase, in what's known as a rights issue, involves an offering of shares to existing shareholders at a discount, a common practice in Europe.

The bank said it will issue 1.46 billion new shares at a price of EUR4.85 per share, according to regulatory filings published late Monday. Santander's shares closed at EUR6.00 on Monday. Existing shareholders will have until July 20 to decide whether to take part in the capital increase. New shares are expected to begin trading on July 31, Santander said.

Santander, one of Europe's largest lenders, said it will have a capital ratio of around 10.7% after the rights issue under international regulations known as "fully loaded" Basel III criteria. The bank reported a ratio of 10.66% in the first quarter. Bank executives have set a target of 11% by 2018, a ratio that is below that of many peers.

Santander said it expects to report net profit of around EUR3.6 billion in the first half of the year, which would be an increase of 24% compared with the same period last year. The bank said the integration of Banco Popular will have a minimal impact on that net profit figure. Santander is slated to report second-quarter results on July 28.

The acquisition of Banco Popular contributes around €82 billion in net loans and around €65 billion in deposits, Santander said. Banco Popular's ratio of nonperforming loans to total loans is approximately 20%, which will slightly increase Santander's overall nonperforming loan ratio to around 5.4%. Santander said its overall coverage ratio for loans stands at around 70% after the acquisition of Banco Popular.

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-By Jeannette Neumann at jeanette.neumann@wsj.com

(END) Dow Jones Newswires

July 04, 2017 05:20 ET (09:20 GMT)