• Tag Archives Santander
  • Uncertainty Hits American Farmers and Mexican Consumers

    NAFTA 2.0 gets complicated. With the fifth round of NAFTA negotiations scheduled to begin next week, Mexico finds itself facing a very uncertain future. The free trade agreement upon which its entire national economic model was built is now looking precariously fragile. Ildefonso Guajardo, Mexico’s economy minister, told the Mexican Congress last week that the way things stand, an end to NAFTA ‘cannot sanely be ruled out.’
    In such an event, the resulting economic pain for Mexico could be considerable, according to calculations from Banco Santander. It forecasts a 15% drop in exports and a 16% fall in imports if the US declared a full trade war rather than reverting to World Trade Organization tariff rules. Moody’s Investors Service estimates Mexico’s economy could shrink as much as 4%.
    The biggest problem for Mexico’s economy is the sheer scale of its dependence on trade with the US: 81% of its exports go to the U. S., and about half of its imports come from there. Mexico is so deeply integrated into US supply chains, particularly manufacturing production that the IMF describes Mexican and American industrial production as ‘co-integrated.’ Increases in American economic output are transmitted one-for-one to Mexican output.

    This post was published at Wolf Street on Nov 13, 2017.


  • The EU Just Did the Big Banks a Massive Favor

    The European Union’s executive arm, the European Commission, made a lot of bank executives very happy this Tuesday by abandoning its multi-year pledge to break-up too-big-to-fail lenders. Despite the huge risk they still pose to Europe’s rickety financial system, big European banks like Deutsche Bank, BNP Paribas, ING, and Santander can breathe a large sigh of relief this week in the knowledge that they will not have to split their retail units from their riskier investment banking arms.
    Breaking up the banks would remove much of the risk from today’s government-backed banks, such as derivatives and other instruments that were heavily involved in the Financial Crisis. Without these hedge-fund and investment-banking activities, even large banks would be smaller, less interconnected, and could be allowed to fail without jeopardizing the entire global financial system.
    According to the Commission, such a drastic measure is no longer necessary since the main rationale behind ring-fencing core banking services from investment banking divisions – i.e. to make Europe’s financial system less disaster prone – has ‘already been addressed by other regulatory measures in the banking sector.’ That’s right: Europe’s banking system is already safe, stable and secure. Bloomberg:

    This post was published at Wolf Street on Oct 25, 2017.


  • Rajoy Continues to Act in the Spirit of Franco Warning Spain Cannot be Trusted?

    Spain is showing that it truly remains a fascist state in the spirit of Franco and Rajoy plans to just seize Catalonia. Meanwhile, the Catalan citizens’ movement, Assemblea Nacional, is calling on all Catalans to withdraw all their money as much as possible from one of the five largest Spanish banks to increase pressure on Madrid, These include Caixa Bank, Bankia, Sabadell, BBVA and Santander. Americans supporting Catalonia are also urged to withdraw all funds from Santander in the USA.

    This post was published at Armstrong Economics on Oct 22, 2017.


  • New U.S. Subprime Boom, Same Old Sins: Auto Defaults Are Soaring

    It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud. Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017.
    A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.
    Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo & Co.
    Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.
    Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.

    This post was published at bloomberg


  • Autopsy of Banco Popular Shows Fragility of EU Banking System

    What would a disorderly bank collapse in Spain and Italy have done?
    By Don Quijones, Spain & Mexico, editor at WOLF STREET.
    New information has revealed just how serious a threat a disorderly collapse of Spain’s sixth largest bank, Banco Popular, might have posed to Spain’s banking system. In its final days, Popular was bleeding deposits at a rate of 2 billion a day on average.
    Much of the money was being withdrawn by institutional clients, including global mega-fund BlackRock, Spain’s Social Security fund, Spanish government agencies, and city and regional councils, prompting accusations that Spain’s government was using insider knowledge to withdraw large amounts of public funds, which of course hastened Popular’s demise.
    All the while, Spain’s Economy Minister was telling the bank’s less privileged investors, including retail shareholders and junior bondholders, that there was absolutely nothing to worry about. Those that believed him lost everything.
    Between the end of March and its last day of trading, Popular shed 18 billion of deposits, roughly a quarter of the total. On the night of June 6, Europe’s Single Supervisory Mechanism decided that the bank could no longer cover its collateral. Popular, warts and all (take note, Italy), was sold for the meager sum of 1 to Banco Santander, though Santander will have to raise 7 billion of fresh capital to fully digest the bad stuff on Popular’s books.

    This post was published at Wolf Street on Jun 29, 2017.


  • Italian Taxpayers To Foot 17 Billion Bill As Rome Bails Out Another Two Insolvent Banks

    Two weeks after the first, and biggest, European bank bail-in took place under the relatively new European bank resolution mechanism, the EBRD, when Spain’s Banco Popular wiped out the holders of its most risky securities, including equity and AT bonds, and then selling what was left of the bank to Santander for 1 – a process that took place without a glitch – Italy may have just killed any hope of a European banking union, when the bailout of two small banks made a “mockery” of Europe’s new regulation.
    Late on Sunday, Italy passed a decree that will effectively sell the good part of the two banks to Intesa, Italy’s second-largest and best-capitalized bank. Intesa said last week that it would be willing to buy the best assets for a token price of 1 as long as the government assumed responsibility for liquidating the banks’ large portfolio of sour loans. As a result, Italy said it would commit as much as 17 billion in taxpayer funds to clean up the two failed “Veneto” banks in one of Italy’s wealthiest regions and support the takeover of their good assets by Intesa Sanpaolo SpA for a token amount. After an emergency cabinet meeting on Sunday, Finance Minister Pier Carlo Padoan said the Italian government will provide Milan-based Intesa with about 5.2 billion euros to allow it to take on Banca Popolare di Vicenza SpA and Veneto Banca SpA assets without hurting capital ratios, The European Commission, in a separate statement, said it approved the plan for the two banks and that it is in-line with state-aid rules.
    Unlike the Banco Popular bail-in by Santander, however, Intesa would only take on the good assets. PM Gentiloni said the lenders will be split into good and bad banks and that the firms, with taxpayers on the hook for the bad banks. The process was rushed to allow the failed banks to reopen on Monday and avoid a depositor panic and bank run. The intervention is necessary because depositors and savers were at risk, Gentiloni said. The northern region where they operate ‘is one of the most important for our economy, above all for small- and medium-size businesses.’

    This post was published at Zero Hedge on Jun 25, 2017.


  • Argentina Unexpectedly Announces Sale Of 100-Year Bonds

    One year after Argentina emerged from its latest sovereign bankruptcy, and at a time when the Latin American nation grapples with a surging budget deficit, Argentina surprised markets by announcing (on Twitter) its intention to sell its first 100-year bond, taking advantage of a world starved for yield.
    The issuance, expected to price on Monday with a potential yield of 8.25% according to Reuters IFR – we expect this number to come down as the offering will likely be many times oversubscribed – came as a surprise, as Finance Minister Luis Caputo has said Argentina would meet the rest of its financing needs in non-dollar currencies after selling $7 billion in dollar bonds in January. According to Reuters, Citi and HSBC are acting as lead book runners on the deal, while Nomura Securities and Banco Santander are co-managers.

    This post was published at Zero Hedge on Jun 19, 2017.


  • Fear of Contagion Feeds the Italian Banking Crisis

    At first, deny, deny, deny. Then taxpayers get to bail out bondholders.
    By Don Quijones, Spain & Mexico, editor at WOLF STREET.
    Spain’s Banco Popular had the dubious honor of being the first financial institution to be resolved under the EU’s Bank Recovery and Resolution Directive, passed in January 2016. As a result, shareholders and subordinate bondholders were ‘bailed in’ before the bank was sold to Santander for the princely sum of one euro.
    At first the operation was proclaimed a roaring success. As European banking crises go, this was an orderly one, reported The Economist. Taxpayers were not left on the hook, as long as you ignore the 5 billion of deferred tax credits Santander obtained from the operation. Depositors and senior bondholders were spared any of the fallout.
    But it may not last for long, for the chances of a similar approach being adopted to Italy’s banking crisis appear to be razor slim. The ECB has already awarded Italy’s Monte dei Paschi di Siena (MPS) a last-minute reprieve, on the grounds that while it did not pass certain parts of the ECB’s last stress test, the bank is perfectly solvent, albeit with serious liquidity problems.

    This post was published at Wolf Street by Don Quijones ‘ Jun 16, 2017.


  • The Next Financial Crisis Has Already Arrived In Europe, And People Are Starting To Freak Out

    Did you know that the sixth largest bank in Spain failed in spectacular fashion just a few days ago? Many are comparing the sudden implosion of Banco Popular to the collapse of Lehman Brothers in 2008, and EU regulators hastily arranged a sale of the failed bank to Santander in order to avoid a full scale financial panic. Sadly, most Americans have no idea that a new financial crisis is starting to play out over in Europe, because most Americans only care about what is going on in America. But we should be paying attention, because the EU is the second largest economy on the entire planet, and the euro is the second most used currency on the entire planet. The U. S. financial system is already teetering on the brink of disaster, and this new financial crisis in Europe could turn out to be enough to push us over the edge.
    If EU regulators had not arranged a ‘forced sale’ of Banco Popular to Santander, we would probably be witnessing panic on a scale that we haven’t seen since 2008 in Europe right about now. The following comes from the Telegraph…
    Spanish banking giant Santander has stepped in to the rescue ailing rival Banco Popular by taking over the failing lender for 1 in a watershed deal masterminded by EU regulators to avoid a damaging collapse.
    Santander will tap its shareholders for 7bn in a rights issue to raise the capital needed to shore-up Popular’s finances in a dramatic private sector rescue of Spain’s sixth-largest lender.
    It will inflict losses of approximately 3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout.

    This post was published at The Economic Collapse Blog on June 12th, 2017.


  • Is Another Spanish Bank about to Bite the Dust?

    Stockholders and junior bondholders fear a ‘bail-in.’
    After its most tumultuous week since the bailout days of 2012, Spain’s banking system is gripped by a climate of fear, uncertainty and distrust. Rather than allaying investor nerves, the shotgun bail-in and sale of Banco Popular to Santander on Tuesday has merely intensified them. For the first time since the Global Financial Crisis, shareholders and subordinate bondholders of a failing Spanish bank were not bailed out by taxpayers; they took risks in order to make a buck, and they bore the consequences. That’s how it should be. But bank investors don’t like not getting bailed out.
    Now they’re worrying it could happen again. As Popular’s final days showed, once confidence and trust in a bank vanishes, it’s almost impossible to restore them. The fear has now spread to Spain’s eighth largest lender, Liberbank, a mini-Bankia that was spawned in 2011 from the forced marriage of three failed cajas (savings banks), Cajastur, Caja de Extremadura and Caja Cantabria.

    This post was published at Wolf Street by Don Quijones ‘ Jun 10, 2017.


  • Bank Failures Hither and Yon

    Grant’s Almost Daily reports that despite the seemingly calm economic winds, ‘Banco Popular has managed to run the ship aground. In order to shore up their sickly balance sheet, the acquiring [Banco] Santander will issue a 7 billion rights offering to shareholders. Banco Popular’s equity and junior debt are wiped out, to the tune of 3.3 billion.’
    While America breathlessly waited for former FBI Director Comey to boast daytime TV ratings, the ‘announcement that Banco Popular Espanol SA will be absorbed by the sounder Banco Santander under the auspices of the European Central Bank for considerations of 1 harkens back to March 2008, Bear Stearns and J. P. Morgan,’ writes Philip Grant.
    Have the world’s financial dominoes started falling on that side of the pond?
    Here in the good old USofA. the DJIA rocks while Tesla and Amazon shares roll, but ‘Total US business bankruptcies in May rose 4.7% year-over-year to 3,572 filings, according to the American Bankruptcy Institute. That’s up 40% from May 2015 and up 10% from May 2014.’
    Wolf Richter points out that bankruptcies are seasonal. Fewer of the hopelessly indebted normally throw in the towel in May. However, this year, ‘Total US bankruptcy filings by consumers and businesses in May rose 5.3% year-over-year to 69,668, the highest May since May 2014.’
    Credit card debt is now a trillion dollars, auto debt is $1.12 trillion and student loan debt now totals $1.44 trillion. A trillion here, a trillion there. It starts to add up. And all of this doesn’t include the big driver of consumer bankruptcies, medical costs.

    This post was published at GoldSeek on 9 June 2017.


  • Bank Stocks Have a Completely New Risk

    Spain’s Banco Santander is paying 1 to take over troubled rival Banco Popular, in a deal that illustrates Europe’s new system to rescue failing banks without burdening taxpayers or stressing markets. This is being cheered around the world because the shareholders lost absolutely everything. The bank which was valued in the collapse at 1.6 billion was bought for 1. Forbes wrote:
    ‘This is an excellent example of how the resolution of troubled banks should be done. The shareholders who employed the management which caused the problem lose all their money. The depositors, who were and are not responsible for the bank’s troubles, are protected. And we don’t end up with some great smouldering hole in the financial landscape where Popular used to be, we get new capital raised instead. Further, no taxpayer has been harmed in this operation.’

    This post was published at Armstrong Economics on Jun 9, 2017.


  • ‘Bail-In’ Era for Europe’s Banking Crisis Begins

    Many Banco Popular investors wiped out. Taxpayers off the hook. What it means for Italy. Banco Popular, until today Spain’s sixth biggest bank, is no more. Its assets, including a massive portfolio of small-business clients, now belong to Banco Santander, Spain’s biggest bank. The global giant now has 17 million customers in Spain, a country of just 45 million people. The price was 1.
    Spain’s Ministry of the Economy revealed that by 3 pm Tuesday, Popular was no longer able to contain the deposit outflow. ‘It had exhausted all its lines of liquidity, both ordinary and extraordinary.’ It had run out of collateral to cover any further lines of emergency liquidity.
    This apparently triggered the intervention by the ECB’s Single Resolution Board (SRB), which decided on Tuesday that the bank ‘was failing or likely to fail’ and would have to be wound down, unless a buyer could be found.

    This post was published at Wolf Street on Jun 7, 2017.


  • We Just Had A Bank Bail-In, Anyone Paying Attention – Episode 1300a

    The following video was published by X22Report on Jun 7, 2017
    Retail sales are down in the UK, inflation rising and spending is down. Sears is closing another 66 stores and the retail apocalypse take hold. Older Americans need to work because of zero interest rates, inflation and the devaluation of the dollar, by doing this the younger generation is finding it hard to find those part-time jobs. The stock market is repeating what we saw back in 2000 and 2006, and we know how that ended, in a crash of the market and a recession. Spain’s Banco Popular just did a bail-in and it was purchased by Santander. China signaled they were going to purchase Treasuries and this might have been agreement that Trump made during the meeting with Xi Jin Ping.


  • CoCo Loco! Spain’s Banco Popular Plunges, Suspended By Regulator and Sold To Banco Santander For 1 Euro

    Spanish bank, Banco Popular, has been declining in price for some time thanks to plunging earnings.
    Banco Popular’s bad loans totaled 35.7 billion euros ($38 billion) at 4Q, not a good sign. Flagging earnings and $38 billion in bad debt has resulted in declining stock prices and trading suspended by their regulator.
    And The Single Resolution Board agreed to the sale of Banco Popular for One Euro to Banco Santander. But even at One Euro, Banco Santander is not seeing any ‘bargain surge.’

    This post was published at Wall Street Examiner on June 7, 2017.


  • What Europe’s First Official Bail-In Looks Like

    “If you think this has a happy ending, you haven’t been paying attention,” warns MINT Partners’ Head of Capital Markets Bill Blain, as he reflects on what just happened in Europe (that US equities seem happy to brush off as yet another fleshwound to global instability).
    There is a rule in Financial Institutions that any bank that calls itself ‘popular’ generally isn’t. This was proved last night. But, congratulations if you were a holder of Spain’s Banco Popular’s Senior Debt – they did a Zebedee ‘boing!’ on the basis last night’s last minute Santander rescue makes the bonds money good.
    Bad news for the Equity and COCO AT1 holders – who have the distinction of holding the first major bank capital bonds to be bailed-in/wiped out under EU regulations. Banco Popular senior debt is 12 points higher this morning.
    The AT1 perps are trading at 2.6%, down 50 points!!, and even that price looks optimistic. Ahah. We’ve not seen crashes like that since 2008.
    Popular has been desperately seeking a rescue for the last few weeks, but everyone looked the other way. So last night the ECB triggered the ‘Single Resolution Mechanism’ when it determined the Popular’s liquidity crisis was such its equity would be unable to cover debts or other liabilities.

    This post was published at Zero Hedge on Jun 7, 2017.


  • Banco Popular’s Co-Co Bonds Plunge as Balance Sheet Chaos Revealed in Potential Forced Sale

    ‘This sales process is atypical, as the seller itself cannot at this point make a rough calculation of what the value of the entity is, and if they can’t, neither can we.’
    By Don Quijones, Spain & Mexico, editor at WOLF STREET.
    The current share price of Spain’s sixth biggest bank, Banco Popular, at 0.67, is just pennies above its lowest point ever. According to analysts at 20 different investment banks consulted by Bloomberg, the ‘objective’ value of those shares could be anything from 1.50 (Oddo & Cie) to 0.25 (Kepler Cheuvreux).
    There’s good reason for this uncertainty: Popular’s books are filled with impaired real estate assets that date back to before the collapse of Spain’s gargantuan real estate bubble. They are now in varying stages of decomposition. And the prices at which they’ve been valued on the bank’s books appear to have little relation with today’s reality.
    It now turns out that not even Popular’s management knows what’s really going on on Popular’s books.
    Representatives of Banco Santander and majority state-owned Bankia, the two banks studying Popular’s books to decide whether or not to submit a binding offer for the bank before the deadline of June 10, are having serious difficulties trying to understand Popular’s accounts, according to Spain’s financial daily Expansin. Although there is ‘total collaboration’ from the struggling entity, Popular’s management has not yet completed its own review of the impaired assets on the bank’s balance sheets and therefore cannot offer a precise valuation of the bank.

    This post was published at Wolf Street by Don Quijones/ May 29, 2017.


  • Liar Loans Dog Subprime Auto-Loan-Backed Securities

    Santander, top subprime auto lender, verified income on only 8% of loans: Moody’s.
    ‘Liar loans’ were a factor in the housing bust during the Financial Crisis that brought down the banks. Bank regulators now require lenders to verify income and employment of mortgage applicants and take other steps to make sure buyers can afford the mortgage payment. But in auto loans, no such requirement exists. So here we go again…
    Moody’s Investors Service analyzed $1 billion of Asset Backed Securities (ABS) backed by subprime auto loans that Santander Consumer USA Holdings, one of the largest subprime auto lenders, had issued. ‘Subprime’ means the borrower has a credit score of 620 or below. Turns out, Santander had verified the income of the borrowers on only 8% of the subprime loans.
    Moody’s found other lapses, including loans with very low or no credit scores and no co-signer.
    Back in February, Moody’s had rated these subprime-auto-loan-backed securities as high as Aaa. Among the institutional investors that bought them was Massachusetts Mutual Life Insurance, according to Bloomberg.
    Moody’s contrasts Santander’s lack of even basic due diligence, such as verifying income and employment, with an auto-loan based securitization issued by GM’s finance subsidiary AmeriCredit. Moody’s compared the two because they are the top issuers of subprime auto-loan ABS. Turns out, AmeriCredit had verified income on 64% of the loans in the securitization. Bloomberg:

    This post was published at Wolf Street on May 23, 2017.


  • Hit by Run on Deposits, Banco Popular Denies it’s Looking for Rushed Takeover to Avert Collapse

    Spain’s 6th largest bank: ‘We have liquidity until the end of the year.’
    In the world of banking, confidence and trust are a precious currency. The moment a bank loses them, things tend to spiral down quickly. Spain’s sixth biggest and desperately troubled bank, Banco Popular, appears to be well along the process of losing the confidence of its customers, and with it their deposits. Last year the bank lost 6.5% of its deposit base. But now, according to a report by the financial daily El Confidencial, the deposit outflow is swelling from a trickle into a deluge.
    The bank responded by making its deposits more attractive. Its deposit rates now range between 0.75% and 4%. With the eurobor at 0%, offering such enticing rates will obliterate Popular’s wafer-thin margins.
    Yet the outflow only accelerated. Last week, when the bank reported a quarterly loss of 139 million, it disclosed that deposits had dropped an additional 5%, to 78.8 billion, in the January-March period.
    But then came a fresh bombshell yesterday afternoon. El Confidencial reported that the outflow of deposits by private and institutional depositors has reached such proportions that the bank was on the verge of default. Its senior management had contacted the CEOs of Spain’s five biggest banks, Santander, BBVA, Caixabank, Banc de Sabadell and majority publicly owned Bankia, to discuss the urgent need for a quickfire takeover. The report stated that Popular’s new chairman, Emilio Saracho, a former vice-president of JP Morgan Chase, had hired JP Morgan, Lazard and Socit Gnrale to find a buyer.

    This post was published at Wolf Street on May 12, 2017.


  • Wells Fargo, JPMorgan Wary of Auto Loans, Pack Them in Bonds (The Secret of NIM)

    Yes, we are seeing the offloading of risk assets into structured bonds … again.
    (Bloomberg) – Matt Scully – Depending whose money they’re using, Wells Fargo & Co. and JPMorgan Chase & Co. either love subprime car loans or fear them.
    Both banks have grown more reluctant to make new subprime loans using money from their own balance sheets. Wells Fargo tightened its underwriting standards and slashed the volume of all loans it made to car buyers in the first quarter by 29 percent after greater numbers of borrowers fell behind on payments. JPMorgan’s consumer and community banking head Gordon Smith earlier this year said the bank had cut its new lending for subprime auto loans ‘dramatically.’
    At the same time the firms are indirectly funding billions of dollars of the loans by helping companies like Santander Consumer USA Holdings Inc. borrow in the asset-backed securities market, essentially shunting money from bond investors to finance companies. Wall Street banks packaged more loans from finance companies into bonds in the first quarter than the same period last year, and Wells Fargo and JPMorgan remained two of the top underwriters of the securities.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ April 27, 2017.