This development is a good start for Banco Popular, given the situation it got to in recent weeks, said Luis de Guindos, Spain’s minister of economy, industry and competitiveness in a statement on Wednesday, as it involves maximum protection to depositors and the continuity of activity.
“The operation is carried out without the use of public resources and, therefore, does not lead to an eventual contagion between sovereign and banking risk, as it happened in the past. The current situation is very different from that of 2012, given the good health of the whole financial sector and the Spanish economy in general. This gives the best circumstances to provide the most appropriate and effective solutions under European authority, with the ultimate goal of preserving the stability of the financial system,” he said in the statement.
Management at Banco Popular had declined the funding support that had been offered to it in 2012 and instead opted for a series of piecemeal share sales which Parker said had proven ineffective.
“That has been clearly a failure,” said the long-term financier, adding that he hoped a potential comparison with the troublesome buyout of HBOS by Lloyds Bank in the U.K. was wrong given the strength of Santander’s management.
“A lot hinges on how much of the bad debt are they taking on and I’m assuming that that is actually going to be parceled off into a bad bank and therefore Santander will end up with the viable retail and banking operations,” Parker observed.
Without knowing the full facts, it looks as though Santander might have been lent on by the ECB to carry out the rescue mission, suggested Martin Gilbert, chief executive officer (CEO) of Aberdeen Asset Management, talking on CNBC on Wednesday.
“It smacks a bit of the Bank of Scotland (HBOS) / Lloyds where you never know how much pressure is put on the biggest bank in Spain by the central bank. So I’d be surprised if they had agreed to it under duress but that will come out,” he said.
“It will be interesting to see how dilutive this deal is for existing shareholders,” he added.