UPDATE 1-Spain's Popular clears key hurdle with capital hike
MADRID Nov 28 (Reuters) - Banco Popular cleared a major hurdle for the reform of Spain's financial system after it announced on Wednesday it had fully covered its 2.5 billion euros capital increase.
The capital raising by Spain's sixth-biggest bank was an attempt to avoid seeking state aid after an independent audit of Spanish banks found it needed an extra 3.2 billion euros to weather a serious economic downturn.
It was also a key test of Spanish banks' ability to tap markets, and some market participants compared it with last year's 3.1 billion euro initial public offering (IPO) at state-rescued Bankia that collapsed in value.
Popular was the largest non-nationalised Spanish entity to fail the September stress test after it was hit hard by a property crash that started four years ago.
Earlier on Wednesday, the European Commission approved the recapitalisation plan of four nationalised Spanish banks, clearing the way for 37 billion euros ($48 billion) of European funds to be pumped into Spain's troubled lenders.
The International Monetary Fund (IMF) said on Wednesday that Spain's financial sector reform was on track and all deadlines have been met so far, but difficult steps remained while risks for the economy and the country's lenders remain high.
Banco Popular said its five biggest shareholders - Barrie Foundation, German insurer Allianz, French bank Credit Mutuel, Portuguese businessman Americo Amorim and investment fund Union Europea de Inversiones - subscribed 20.8 percent of the new shares, or 520 million euros, more than the 420 million euros initially foreseen.
Before the capital increase, the core shareholders held 24.5 percent of the lender.
No figure were provided of how much each of the core shareholders would hold after the capital increase. Final details will be published on Dec. 4, while the new shares will begin trading on Dec. 6.
Popular also said retail investors, which held around 49 percent of the bank's shares before the deal, strongly backed the operation.
The lender however had to offer a 64 percent discount to attract investors, more than the discount of up to 55 percent that analysts had initially anticipated.
The operation was guaranteed by a group of banks led by Deutsche Bank and Santander.