We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Banco Santander (SAN) Wins Auction to Acquire Banco Popular
Read MoreHide Full Article
Banco Santander, S.A. (SAN - Free Report) announced on Wednesday that it has succeeded in the auction conducted by the Single Resolution Board, the new European authority dealing with failing banks, to acquire Banco Popular for just €1. With this acquisition, Santander will become a dominant player in the Spanish markets and the company will be able to expand its footprints in Portugal too.
Following the news, shares of Santander increased nearly 2.5% on the NYSE.
Madrid-based Banco Popular was identified by the European Central Bank as “failing or likely to fail” and hence was put up for sale by the SRB in an auction, which lasted for less than 24 hours.
A few over 30 bidders placed their bids. However, Santander was finally chosen as the most successful bidder because it did not ask for any state guarantees against hidden losses in Popular’s books.
In fact, with this acquisition, Banco Popular becomes the first company the SRB has ever engineered for sale. Also, the deal is the biggest that Ana Botín, Executive Chairman and CEO of Santander, has struck since she assumed the role in 2014, after her father’s death.
What Made the Deal Attractive for Santander?
Since the SRB identified Popular as “failing”, it decided to impose €2 billion of losses on its bondholders and also eliminate all its shareholders. This made taking over Popular fruitful for Santander.
Also, Santander has been continuously trying to make acquisitions in its core markets so as to enhance shareholder value. The company’s main focus has been to grow the SME franchise in Spain, a key driver for economic growth in emerging markets.
With this acquisition, Santander will hold a 25% share of the SME markets in Spain, thus overtaking all of its rivals in the business of SME lending.
Terms of the Deal
Once Popular gets fully integrated with Santander, the resultant company will work under the Santander brand.
In order to fund the deal, Santander will complete a rights issue worth €7 billion. Also, Santander will increase its provisions for non-performing assets so as to bring Popular’s provisions and capital in line with the remaining Santander Group.
Financial Impact
Santander expects the acquisition to generate return on investment of 13-14% in 2020. Also, the transaction is likely to be accretive to EPS in 2019.
Moreover, the acquisition is expected to result in cost synergies of nearly €500 million annually from 2020. As a result, the Santander group will have an efficiency ratio, which is the best in both Spain and Portugal.
Notably, the transaction will have a neutral impact on Santander’s CET1 capital ratio. However, it is expected to significantly enhance the Group’s capacity to generate capital organically, going forward.
Shares of Santander gained 42.1% in the last one year, outperforming the Zacks categorized Banks - Foreign industry’s growth of 19.3%.
Some other stocks in the same space worth considering include Grupo Financiero Galicia S.A. (GGAL - Free Report) , HSBC Holdings plc (HSBC - Free Report) and UBS Group AG (UBS - Free Report) .
Grupo Financiero has witnessed an upward earnings estimate revision of 3.4% for the current year in the last 60 days. Its share price has risen 54.1% in the last one year. It currently sports a Zacks Rank #1.
HSBC currently carries a Zacks Rank #2. For the current year, in the last 60 days, its Zacks Consensus Estimate has been revised nearly 1% upward. Its share price has increased 37.4% in the last one year.
UBS Group also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 5% for the current year in the last 60 days, while its share price is up 9% in the last one year.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Banco Santander (SAN) Wins Auction to Acquire Banco Popular
Banco Santander, S.A. (SAN - Free Report) announced on Wednesday that it has succeeded in the auction conducted by the Single Resolution Board, the new European authority dealing with failing banks, to acquire Banco Popular for just €1. With this acquisition, Santander will become a dominant player in the Spanish markets and the company will be able to expand its footprints in Portugal too.
Following the news, shares of Santander increased nearly 2.5% on the NYSE.
Madrid-based Banco Popular was identified by the European Central Bank as “failing or likely to fail” and hence was put up for sale by the SRB in an auction, which lasted for less than 24 hours.
A few over 30 bidders placed their bids. However, Santander was finally chosen as the most successful bidder because it did not ask for any state guarantees against hidden losses in Popular’s books.
In fact, with this acquisition, Banco Popular becomes the first company the SRB has ever engineered for sale. Also, the deal is the biggest that Ana Botín, Executive Chairman and CEO of Santander, has struck since she assumed the role in 2014, after her father’s death.
What Made the Deal Attractive for Santander?
Since the SRB identified Popular as “failing”, it decided to impose €2 billion of losses on its bondholders and also eliminate all its shareholders. This made taking over Popular fruitful for Santander.
Also, Santander has been continuously trying to make acquisitions in its core markets so as to enhance shareholder value. The company’s main focus has been to grow the SME franchise in Spain, a key driver for economic growth in emerging markets.
With this acquisition, Santander will hold a 25% share of the SME markets in Spain, thus overtaking all of its rivals in the business of SME lending.
Terms of the Deal
Once Popular gets fully integrated with Santander, the resultant company will work under the Santander brand.
In order to fund the deal, Santander will complete a rights issue worth €7 billion. Also, Santander will increase its provisions for non-performing assets so as to bring Popular’s provisions and capital in line with the remaining Santander Group.
Financial Impact
Santander expects the acquisition to generate return on investment of 13-14% in 2020. Also, the transaction is likely to be accretive to EPS in 2019.
Moreover, the acquisition is expected to result in cost synergies of nearly €500 million annually from 2020. As a result, the Santander group will have an efficiency ratio, which is the best in both Spain and Portugal.
Notably, the transaction will have a neutral impact on Santander’s CET1 capital ratio. However, it is expected to significantly enhance the Group’s capacity to generate capital organically, going forward.
Shares of Santander gained 42.1% in the last one year, outperforming the Zacks categorized Banks - Foreign industry’s growth of 19.3%.
Currently, the stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks to Consider
Some other stocks in the same space worth considering include Grupo Financiero Galicia S.A. (GGAL - Free Report) , HSBC Holdings plc (HSBC - Free Report) and UBS Group AG (UBS - Free Report) .
Grupo Financiero has witnessed an upward earnings estimate revision of 3.4% for the current year in the last 60 days. Its share price has risen 54.1% in the last one year. It currently sports a Zacks Rank #1.
HSBC currently carries a Zacks Rank #2. For the current year, in the last 60 days, its Zacks Consensus Estimate has been revised nearly 1% upward. Its share price has increased 37.4% in the last one year.
UBS Group also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 5% for the current year in the last 60 days, while its share price is up 9% in the last one year.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>