LONDON (ShareCast) - Spanish bank Banco Popular, one of the banks that failed the stress tests conducted by Oliver Wyman in September, secured a capital increase of 2.5bn euros, preventing the bank from needing public funds.
Banco Popular shares surged by over 11 per cent on Monday morning after the company approved a capital increase of €623.44m in a shareholder meeting on Saturday.
The bank has decided to issue 6.234bn shares at a nominal share price of €0.10 plus a premium of €0.31 for a total issuance price of €0.401 per share, a 64% discount to Friday's closing price. A full subscription of the new shares would be worth €2.5bn.
A group of 15 national and international banks led by Deutsche Bank (Xetra: 514000 - news) , Santander (Madrid: SAN.MC - news) , UBS (NYSEArca: DJCI - news) , Merrill Lynch Bank of America, and JP Morgan have guaranteed to place €2.08bn of the shares with the remainder already committed by major shareholders.
The bank pointed out that the goal of the operation is to strengthen its capital as part of the recapitalisation plan outlined on the Memorandum of Understanding of Spain's bank bailout programme. The bank's recapitalisation plan was approved by the Bank of Spain on October 31st.
Banco Popular President Angel Ron explained that the new shares will be purchased via cash payments and that current shareholders having a preference on the new share subscription. Each existing share will have one preferential subscription right for three new shares.
In an appearance with shareholders, Ron pointed out that the capital increase and complementary measures are part of a new stage for the entity to strengthen the bank's traditional values. The entity will strengthen its retail bank model for families and businesses by preserving solvency, efficiency, and returns. In this manner, the bank aims to successfully exit the long-lasting crisis.
Ron explained that the bank's true value has not yet flourished and that these measures are the best option. It is not the most comfortable option but is the best because it sets the groundwork for the entity's future.