Banco Popular to raise up to 2.5 billion euros through rights issue

May 26, 2016 Facebook Twitter LinkedIn Google+ meat stock

Mid-sized Spanish lender Popular (POP.MC) plans to raise up to 2.5 billion euros ($2.8 billion) through a rights issue, it said on Thursday, as it aims to protect itself as record-low interest rates eat in to banking earnings.
The bank also said the issue aimed to reinforce its capital as it sells off billions of euros of soured real estate assets while protecting its dividend.
Popular, the most exposed of Spanish banks to the troubled property sector, said the issue would allow it to accelerate real estate divestment and report a fully-loaded core capital of over 10.8 percent this year and at least 12 percent in 2018.
The bank’s shares were down 23.5 percent at 1.8 euros per share at 0725 GMT.
Spanish banks have recovered from a real estate crash in 2008 that depleted earnings and forced some into state bailouts, and many have since rebuilt capital levels after taking steep charges on bad property loans and repossessed houses.
Popular is still more exposed than most to the sector and had already announced plans to offload property loans and buildings at a higher rate this year.
Operating conditions for lenders in Spain and elsewhere have become increasingly complicated, with low interest rates hurting returns and as heavily indebted borrowers pay down loans.
“With this decision we have taken into account the need to get ahead of the complex scenario banking activity faces,” Popular said in a statement.
Popular aims to reduce its exposure to property assets by 15 billion euros between 2016 and 2018, it said on Thursday.
The bank said fully-loaded core capital ratio was around 10.8 at the end of the first quarter in proforma terms after the acquisition of Barclays’ (BARC.L) consumer payments business in Spain and Portugal.
Following the issue, of around 2 billion new shares at 1.25 euros ($1.40) per share, the bank said by 2018 it expects a return on tangible equity (Rote) of at least 9 percent and aims to pay at least 40 percent of dividend in cash.
The bank reported Rote of 4.15 percent at the end of March.
Germany’s Allianz (ALVG.DE) aims to take more than 53.4 million shares to hold 3 percent stake in the bank, Popular said.
UBS and Goldman Sachs are the bookrunners for the rights issue, Popular said.
($1 = 0.8947 euros)

(Reporting by Jose Elias Rodriguez; Writing by Paul Day; Editing by Sarah White and Susan Thomas)

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