Emilio Saracho will be appointed as Banco Popular Chairman at today’s Extraordinary Shareholders’ Meeting. The new chairman (ex-deputy chairman at JP Morgan) will very likely revise the bank’s strategic plan, avoiding a new capital hike at least in the short-term.
For Bankinter, the new management’s focus will be on strengthening solvency ratios via the sale of assets. In addition to cutting the high level of unproductive assets (currently around €36 billion), the new strategic plan probably envisages the sale of non-core assets, including the bank’s commercial network in Portugal, its investments in Mexico (25.0% of BX+) and the US (100% of TotalBank), or even the 49% which it has in TargoBank (commercial banking in Spain) or its Private Banking business.
Emilio Saracho will have asked the Chair of the ECB’s Supervisory Board ( Danièle Nouy) for a year to redirect Popular’s strategy and improve its solvency ratios. It’s worth remembering that the bank’s CET I “fully loaded” ratio currently stands at 8.17%, lower than that of its competitors due to the losses recorded in 2016 (-€3.485 billion).
Bankinter believes the measures which Popular’s new Chairman will announce will have a positive impact on the lender’s share price. It reiterates its recommendation for aggressive investors to take an opportunist investment in Popular for two basic reasons: (i) the modification/improvement to the strategic plan will be well received by the capital markets and by the ECB, and (ii) it’s likely Popular will end up being the target of a corporate move, although not until part of the objectives of the new strategic plan have been met.
