MADRID Banco Popular, regarded as the weak link in Spain's banking sector, is to replace Chairman Angel Ron after shareholders rebelled over his lackluster progress in cleaning up 30 billion euros (25.19 billion pound) in toxic assets.
Ron has led Popular, Spain's sixth largest by assets which holds an outsized proportion of bad real estate loans, through its most challenging period, with its shares down 95 percent to record lows since he took over a decade ago.
The bank's board is expected to unanimously name Emilio Saracho, currently global vice president at JP Morgan Chase, as chairman, Popular said in a statement. Saracho would take the helm by the first quarter of 2017, it said.
Popular's volatile shares reversed a week of losses after the announcement and were up 12 percent by 1340 GMT against a slight drop on Spain's blue-chip Ibex index.
They are however the worst performers on the European STOXX 600 banking index over the last three months.
Since Spain's 2012 financial collapse, banks have enacted many of the reforms policymakers are now demanding in Italy, namely consolidating and cleaning up balance sheets.
While Europe's financiers hang on the outcome of a referendum in Italy this weekend, which could strain the country's already struggling banking sector, Popular is now also under the microscope.
It has trailed its peers over the past year, barely scraping a profit in the past two quarters. In June, it raised 2.5 billion euros ($2.66 billion) via a share issue to clean up its property asset portfolio and announced provisions which it said could lead to overall losses of 2 billion euros in 2016.
Popular has a non-performing asset ratio almost twice as high as the Spanish banking sector's average with around 30 billion euros in toxic real estate assets, according to Standard & Poor's.
Ron planned for Popular to hive off 6 billion euros of its property assets into a separate division to help reduce its non-performing real estate portfolio by 15 billion euros by 2018.
But several board members, led by Mexican billionaire Antonio del Valle, believed the plan did not go far enough and a lack of detail on how it would be structured and financed cast doubt over whether it was feasible.
It is unclear whether the plan could now change with Ron's resignation. A Popular spokesman declined to comment.
Del Valle, according to banking sources, favors merging Popular with a competitor. Reuters has not been able to contact him.
Spain's banking sector has already shrunk by almost two thirds since the country's property bubble burst in 2008, and analysts say there is room for further consolidation.
Spanish newspaper Expansion reported on Thursday that Popular was in talks over a possible takeover by BBVA or another larger rival. Representatives for BBVA and Popular declined to comment on any talks.
Larger rivals such as Banco Sabadell and Caixabank have held informal talks with Popular in recent years, but Ron has pressed the case that Popular should remain independent.
The head of one Spanish fund, speaking anonymously, said Popular would need a second capital infusion of between 2 billion and 3 billion euros to remain an independent lender and doubted the property unit plan would be realized.
Analysts at Credit Suisse said Popular could be an "attractive target" for other banks, but a takeover would be complicated by negotiations over its pricing and whether it would fit in with a possible buyer's strategic plan.
(Additional reporting by Robert Hetz and Jesus Aguado; Editing by Jason Neely)