It was an open secret in recent years and in the end it has crystallized an operation of enormous financial and accounting scope. The bank chaired by Ana Patricia BotÃn has definitely taken control of Banco Popular. Through a movement in which different figures are involved, from your clients to shareholders. All this, after the financial institution collapsed in the equity markets until its shares reached a value of 0,20 euros, at levels of historical lows.
From this general scenario, the corporate operation has not surprised a good part of the financial analysts who saw this alternative as the only solution to Popular's serious liquidity problems. With very relevant falls in recent weeks and that has led to its shareholders losing a good part of their savings. Although it will be worse for those who still remained in value. Because indeed, as a consequence of this measure they will lose 100% of the savings invested. In other words, if you are currently one of these shareholders, the value of your shares will be zero.
It cannot be forgotten in any way that so far this year, the entity accumulated declines greater than 70%. With serious losses for all its investors. Even for those who have taken positions in some areas of their most relevant falls in the markets. With incessant rumors in recent days about a withdrawal of Bankia for control of the bank and that it has definitively ended with the purchase by Santander. This is a new scenario in national banking.
Purchase by Banco Santander
The lack of liquidity has been the trigger that has accelerated the movements in the banking sector. Banco Santander in the end has opted for the acquisition of Popular through the Single European Resolution Mechanism (SRM) for one euro given the unviability of the entity and the evident risk that today could not meet the payments derived from your cash. Not surprisingly, one of the reasons given is that it will not have enough liquidity to open its branches.
In this sense, it must be remembered that Banco Santander and BBVA They were the only entities that participated in the auction that took place on Tuesday night to purchase the Banco Popular, according to sources from the Ministry of Economy. At a time when the financial group had already been intervened by the Single Resolution Board (SRB) of the European Union. Previously, Bankia had also been told that it was interested in the operation, but its intentions are to be realized.
Endorsed by community authorities
In any case, it is an unprecedented financial operation in the euro zone since it is the first time it has occurred. To the point that it constitutes the first intervention in the banking system of the Monetary Union (EU). However, it has the absolute approval of the community institutions. Not in vain, quickly the European Central Bank (ECB) has decided to support this important measure to clear up any kind of doubts about the application of this controversial decision.
In this sense, the National Securities Market Commission (CNMV) decided to suspend the listing of Banco Popular's shares, although the market had already discounted one of the most negative scenarios that could be expected. Where the only opportunity investors will have from now on will be to sue against the entity or, failing that, with the previous bank managers. In their only way out to try to correct this serious problem that arises from now on.
With capital increase in progress
In any case, it will require a capital increase of 7.000 million euros to be carried out over the next few months. With a negative effect on the shares of the Cantabrian financial group that will foreseeably lose value in the next trading sessions. In this sense, Santander shares have closed with a depreciation of 0,88% in line with other values ​​in the sector, including European banks. Right now its shares are trading at 5,75 euros. So far this year, it presents a revaluation of 16,96%. Conforming as one of the highest income values ​​of the national selective index.
The reaction of the national executive has been positive as soon as the new scenario of Spanish banking was known. To the extent that it has shown that the operation has been carried out without using public funds and "without any possible contagion between sovereign and banking risk, as happened in the past." In any case, it is a news of great importance that affects many people, and where the most affected - by far - are the current shareholders of the now defunct Banco Popular
Shareholders lose their savings
One of the clearest effects of this operation is that Popular's shareholders lose all the money they had invested in the listed company. Not in vain, the shares have been amortized in the operation, with which they have simply become worthless. Or what is the same, it is zero. This affects about 300.000 investors that today were positioned in value. Specifically, around 62% of them were holders of less than 1.000 titles. From these data, the conclusion is drawn that a large part of the shareholders are small and medium investors and not large equity funds.
In any case, various law firms are already advertising legal measures of these people to try to recoup the money invested. In this sense, both the financial institution and its former directors could face lawsuits from shareholders. Although at the moment the viability of this proposal remains to be verified. In any case, it is not announced that it is short-term, but that it will require the passage of a reasonable time to initiate the lawsuits. The only hope for retailers is that from now on some kind of mechanism will be set up to compensate them for the latest expansion, as happened a few years ago in the case of preferred
Other major victims of this banking operation are the bondholders. That is, the investors who had contracted bonds from this financial institution. Well, in this case, they will also lose all the savings invested in this financial product, and like investors in the stock market. Bonds is a model of investment in fixed income, but it is not without risks, as has been shown on this occasion.
The savers of the Popular safe
The entity's savers, on the other hand, will not be affected by this new scenario. Because in effect, those people who have contracted savings accounts, pension plans, investment funds or even term deposits should not fear for their financial contributions. In fact, the new duel (Banco Santander) will take over all these financial operations. As a consequence of them, clients will not lose a single euro from these financial products. It is the other side of the coin involved in this intervention.
In addition, they will be backed by the brand of a truly solvent financial group. Not surprisingly, other cases have developed in which similar events have emerged that have never affected savers. In this sense, it cannot be forgotten that depositors are covered by the Deposit Guarantee Fund (FGD), and whose purpose is to guarantee deposits in money and in securities or other financial instruments constituted in credit institutions. For a maximum limit of 100.000 euros for money deposits.
And the Santander investors?
With regard to the other part of the coin, that is, Santander shareholders, for the moment these corporate movements do not have to affect them. Just because their actions can be immersed in a period of greatest volatility. To the point that a greater difference can be generated between their maximum and minimum prices. More than in other periods of this year. But there should be no sudden movements in its price, as warned by some of the most important analysts of the financial markets.
Another very different thing is what can happen when the dates of the capital increase approach. This is where it is to some extent normal for the stock price to go down. As a consequence of dilution effect of this financial operation. Where it cannot be ruled out even that its valuation revisits the level of four euros per shares. It cannot be forgotten that the extensions are not well seen by investors. Periods where sales are clearly imposed on purchases.
All these movements will be generated in the short term. While in the medium and long term the investment approaches will remain the same as until now. Even reinforced by the greater presence of Banco Santander throughout the vast Spanish geography.