Botin takes on ‘crippled’ rival in her boldest bet

Bloomberg

As dawn broke in Madrid, Ana Botin embarked on the boldest move of her almost three-year tenure as chairman of Banco Santander, Spain’s largest bank.
Botin, better known for accumulating capital and emphasizing internal growth than doing deals, took a page from her late father’s playbook. She agreed to acquire failing Banco Popular Espanol SA for the knockdown price of 1 euro, while absorbing the 37 billion euros ($42 billion) of non-performing assets that laid its rival low.
The acquisition, which capped a tumultuous two weeks as regulators in Madrid and Frankfurt labored to rescue Popular, opened a new chapter for the scion of Spain’s most influential banking dynasty. It showed that Botin may have a taste for the brinkmanship her father Emilio used to turn Santander into a force in global banking.
“Two years ago she said no more inorganic growth and now the bank is doing just that,” said Angel Berges Lobera, a founding partner of AFI, a Madrid-based consulting firm, who follows the Spanish banking industry. “But if you find a good opportunity at your back door and it’s cheap and you can do the government a favor then you don’t let that go.”
The acquisition brought Santander about 4 million customers and 34 billion euros in performing loans to small- and medium-sized companies, the type of high-margin business that Botin has pursued in her growth plan. The deal also makes Santander the undisputed champion in its home market, as measured by deposits and loans.
“This makes huge strategic sense,” Botin, 56, told Bloomberg. “It complements our franchise in Spain and Portugal, and we will be the leading bank in Spain for small- and medium-sized companies with about 24 percent market share. And in Portugal it makes us the leading private bank.”
Santander’s shares rose 4.6 percent to 6.01 euros by 5 p.m. on Thursday, after slipping just 0.9 percent the day before. Some shareholders view the deal favorably even though the bank plans to ask them for 7 billion euros to bolster its capital buffers while taking on Popular and its bad debt.
Even so, Botin acknowledged that the bank could face lawsuits from Popular shareholders and bondholders, who lost about 3.3 billion euros in the rescue.