Popular’s late entry into the real estate sector caused its crisis.

For many years it was the most profitable organization in the Spanish financial sector. It was noted then that she was very conservative: “We’re really like a savings bank.”the then president said, Louis Vallsnoting that it was organization dedicated to financing companies and individuals with very low riskas it targeted companies they knew well and customer groups with relatively high purchasing power.

But abandon the process of concentration of banking activities which began in the first years of the century, Popular It became smaller and smaller, although it maintained its profitability and efficiency until the change of president. Angel Ron He replaced Waltz when he could no longer lead the organization, leading to a change in leadership.

“Popularity was late for the real estate boom”the experts noted and added that, as a result, he attracted the worst promoters when few were willing to lend to them.

When European authorities introduced their first resistance test to assess how much they can cope with possible losses on their own, Popular also received a negative rating. He was allowed not to give his toxic property to a bad bank.unlike what happened with the old boxes. He was excluded from the stigma of accepting government assistance and transferring his real estate assets to Sareb to restore the balance of his solvency..

They wanted to limit the problems to the world of old boxes. “Perhaps we were wrong then”

he even stated Luis Linde, Governor of the Bank of Spain at that time, years later, as part of the Congress of Deputies commission of inquiry into the financial crisis.

At the end of 2012, Popular suspended dividend payments to increase reservesand cope with losses. A year later, he returned this amount (four euro cents per share) under a flexible dividend formula.which made it possible to pay with new bank shares.

Capital increase

In 2013, Popular completed the first of three capital increases it had undertaken through 2016. try to balance the bank’s balance sheet and meet the growing reserve requirements given the deterioration of its accounts.

The first expansion was to be included inMexican investors led by $450 million Antonio del Valle and Popular acquired 25% of the Mexican company controlled by Del Valle. It is the largest individual shareholder, He joined the People’s Council.

A year later Popular had to do new expansion costing 2.5 billionto recoup losses and meet solvency requirements. Other Spanish banks were expanding during those years, but Popular’s problem was that These two operations were not enough, and in June 2016 a new one was announced for $2.5 billion.noting in its prospectus that, The bank is expected to post a loss at the end of the year despite the capital injection.

So it was. Losses recognized at the end of 2016 amounted to RUB 3,485.3 million. (compared to a meager profit of 115 million a year earlier) resulting in a provision of 5,750 million. The default rate ended that year at 14.61% on loans.

The real problem was not only that the balance was deteriorating, but that it was constantly declining.among other things because The bank sold what assets it could, shedding the best part of its balance sheet to gain resources that would allow it to recover.

Management has been failing for years and Angel Ron, who initially served as executive president and had no CEO, was eventually forced to appoint one due to pressure from shareholders and executives. The chosen one after the first expansion by 2500 million became Francisco Gomez, who was previously responsible for risks. And the then financial director, Jacobo Gonzalez-Robattoand the head of a commercial bank, Angel Rivera (today CEO of Santander Spain) saw their aspirations cut short. Both left the organization.

But since the situation did not improve and it was necessary new expansion, two years later, Gomez was fired and replaced by Pedro Larena.after closing this extension. Larena resigned just months after Ron stepped down as president.

Accounts

Popular’s major shareholders contributed to the president’s departure after they suffered larger-than-expected losses in 2016., because he understood that he was not able to turn the creature back. And they called Emilio Sarachocame from JPMorgan and devoted his entire professional career to investment banking.

In March 2017, Popular accounts, introduced by Larena in late April, revealed sharp drops across all fields, compared to a year earlier, with the exception of the volume of provisions, which continued to grow as the share of defaults also increased.

Popular has already presented the corresponding fact, slightly changing the reports for 2016, and announced review of your entire property portfolio to calculate your realistic collateral needs. Rating agencies announced a rating downgrade. In those circumstances Larena submitted her resignation without working in the position for even a year..

Warnings made by Saracho at the April shareholders’ meeting regarding need for new expansion or sale to a third party and incorrect data was made investors will withdraw funds gradually but constantly. The situation was complicated by the fact that None of the banks invited to review the accounts in case they wanted to submit a purchase offer did so.

Flight from deposits

The planned increase in capital turned out to be impossible.because the essence began to suffer such a significant outflow of deposits that the bank had to request liquidity from the Bank of Spain.

The economy he led Luis de Guindos refused to allow the Treasury to guarantee this liquidity. that Popular needed to deal with the outflow of deposits. The Bank of Spain did not make the latest liquidity request because Popular did not provide the necessary guarantees.

By June 6, the bank had run out of liquidity. At the end of that day, those in charge of Popular realized that they did not have the resources to open offices.as refund requests have exceeded their funds. Saracho called the council to request an organization resolution from the European Single Resolution Board (SRB).

JUR had one night to find a buyer if it wanted to avoid possible contagion of the entire Spanish financial sector the next day.. He found Santander is ready to provide 14,000 million worth of liquidity (so that Popular can operate on the 7th).

Santander pays one euro

Santander acquired Popular for one euro after shareholders lost their entire investment and CoCo holders lost $2 billion. In return, Santander implemented a new capital increase of 7,500 million, mainly to clean up Popular, but partly also to strengthen its solvency which was very close to the minimum required by the managers.

Popular opened its doors on the 7th and the waters calmed. But Santander’s expectation of achieving significant profitability from its operations did not materialize, at least when expected, as interest rates went into negative territory to save the eurozone economy.