Spanish bank’s trip from most profitable to capital deprived

Bloomberg

Atop a hill in southern Spain sit a cluster of cement apartment blocks surrounded by scruffy gardens. Built during the go-go years of the country’s property bubble, the development was eerily still on a recent June morning.
Banco Popular Espanol SA, which took ownership in a foreclosure, is offering flats for as much as 147,000 euros (US$165,100). Fatima Smanri, a resident, is skeptical. The gated complex, called Hacienda Casares, lies inland from the sea and almost 100 kilometers (62 miles) from the nearest Spanish airport.
“No one is going to pay that amount to live here,” said Smanri, a 43-year-old mother of three who says she rents an apartment in the development for 200 euros a month. “There is absolutely nothing. You need a car just to get a loaf of bread, and at night, coming up the hill, it’s completely dark.”
Almost a decade after Spain’s property crash, bad loans and foreclosed real estate remain a burden on the nation’s banks, especially Banco Popular. The Madrid-based lender last month announced a 2.5 billion-euro capital increase to cover property-related losses, surprising investors and raising concern banks elsewhere in southern Europe may follow suit as they grapple with soured loans and record-low interest rates.

Second Time
Banco Popular’s capital call, the second in less than four years, has also cast doubt on the future of Chairman Angel Ron, who has run the lender for more than a decade. Critics blame the 53-year-old for leading a push into real estate before the financial crisis and taking too long to clean up afterward. “It’s surprising that nothing has happened at the management level,” given that the shares have fallen some 95 percent from their peak, said Jaume Puig, general director of Barcelona-based GVC Gaesco Gestion, which manages 1.3 billion euros. “It’s not understandable.”
The bank also warned it may post a full-year loss and suspend the dividend because of possible provisions of as much as 4.7 billion euros in 2016. That marks a turnabout from the 1990s, when Banco Popular was often ranked among the world’s most profitable banks by ratings company IBCA, and analysts criticized it for holding too much capital rather than too little.