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

MADRID – 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."

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

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