‘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.
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