Popular Shares Fall to Record Low on Doubts Over Rescue Options

(Bloomberg) -- Banco Popular Espanol SA shares fell as much as 17 percent, the biggest intraday drop for a nearly a year, to a record low on renewed concern over whether the lender will be able to sell itself or raise capital to repair a balance sheet ravaged by soured real estate.

Shares in Popular were down 16 percent to 0.51 euros at 11:44 a.m. in Madrid, extending a five-day falling streak with the volume of shares trading more than doubling the three-month full-day average. Banco Popular's riskiest debt securities, its additional Tier 1 notes, fell for the ninth day.

“The market is pricing in that a bailout may be inevitable,” said Carlos Ortega, an equity trader at Beka Finance Sociedad de Valores.

The European Union's Single Resolution Board said in a statement Wednesday it never makes warnings about banks after Reuters reported that its Chairman Elke Koenig had issued an “early warning” about Popular. The lender is now mulling a sale for 0.55 euros per share, ABC newspaper reported Thursday.

A spokesman for Popular declined to comment when contacted by Bloomberg.

Popular's 500 million euros of 11.5 percent bonds callable in October next year plunged 5.87 cents on the euro to 55.5, a record, while its 8.25 percent notes fell 2.34 cents to 50.29 cents, also a record, according to date compiled by Bloomberg.

Popular's new Chairman Emilio Saracho is on a mission to salvage the stricken
lender either by finding a buyer or raising funds through a share sale. The
lender, which shunned a bailout in 2012, has seen its capital eroded by
mounting losses on the 37 billion euros of non-performing assets still piled up
on its balance sheet.

Popular, which has already tapped shareholders three times since 2012 to raise
5.5 billion euros ($6.2 billion) posted a 3.6 billion loss for 2016 and a further 137 million-euro deficit in the first quarter. At 7.33 percent, Popular's fully-loaded CET1 ratio, a measure of solvency, is one of the weakest of any lender in Western Europe.

Separately, the bank said on Thursday it would sell its 49 percent stake in Targobank to Credit Mutuel for 65 million euros subject to conditions being approved, adding that the sale would not have a significant impact on its capital position or earnings.

--With assistance from Todd White Esteban Duarte and John Glover

To contact the reporter on this story: Maria Tadeo in Madrid at mtadeo@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Charles Penty