MADRID/MEXICO CITY (Reuters) - Spanish lender Popular POP.MC said on Wednesday it would raise up to 450 million euros ($620 million) by selling shares in the bank to new Mexican investors, allowing it to boost its solvency ratio and secure a stake in a small Mexican bank.
Spanish banks and companies, hurt by a deep recession, have started to turn to Latin America for investment and growth. While Mexico’s economy is forecast by the United Nations to expand 3.5 percent next year, Spain’s is expected to grow no more than 1 percent.
Banks across Europe are also preparing for a region-wide health check of their assets next year, putting them under pressure to improve their financial strength.
Popular’s deal involves Mexico City-based bank BX+ - also known as Grupo Financiero Ve Por Mas - and its controlling shareholders, billionaire businessman Antonio del Valle and his family.
These investors, and other unnamed Mexican business people, will subscribe to a capital increase of up to 450 million euros in December this year, handing them about 6.4 percent of the Spanish bank, Popular said.
About 114 million new shares will be offered at 3.95 euros a share, a discount of 5 percent to the closing price of Popular’s stock on Tuesday.
Popular said it would in turn inject 97 million euros of capital into BX+ in the first quarter of 2014, in exchange for a 24.9 percent stake in the Mexican bank.
“For Popular it’s quite a positive operation given that it’s capturing foreign investors who are likely to be long-term shareholders, and that the discount on the capital increase is of only 5 percent,” said Nuria Alvarez, a Madrid-based analyst at brokerage Renta 4.
Popular shares closed down 1.4 percent at 4.1 euros per share.
Popular was among Spanish banks that managed to escape a state bail-out last year, when Spain had to turn to Europe for 41 billion euros in aid for the lenders unable to cope with the after-shocks of the 2008 real estate crash.
But it did have to turn to shareholders in 2012 for a 2.5 billion euro capital hike, and has still been trying to bulk up its solvency ratios since. In October it issued a bond that can convert into capital, though it paid a high price for the deal.
Popular said the Mexican transaction would improve its capital to risk-weighted asset ratio by 54 basis points to 12.3 percent under so-called Basel 2.5 criteria, a softer version of international rules that are set to be beefed up as of 2013 under a regime known as Basel III.
It had said in October its ‘fully-loaded’ Basel III ratio, which takes into account changes that need to be made by 2019, would reach 8.6 percent at the end of 2013, just above minimum requirements.
Spanish banking peer Sabadell (SABE.MC) turned to Latin American investors in September as part of a 1.4 billion euro capital hike, bringing in Colombian financier Jaime Gilinski as its biggest shareholder.
Other Spanish companies have also attracted investment from the region, with Mexicans among the most active. Mexican frozen food company Sigma Alimentos recently launching a takeover bid for Spanish meat processor Campofrio CPF.MC.
For Popular, the BX+ deal also marks a shift away from its home market, where margins have been squeezed in the economic downturn. Popular was the only one among Spain top six banks to report falling nine-month profits in the year to September.
The bank said it was diversifying geographically and had chosen Mexico for its strong growth prospects. Domestic rivals such as BBVA (BBVA.MC) already have big businesses in Mexico, which helped them weather woes in Spain.
BX+, founded in 1995, is a small player, however, with 19.909 billion pesos ($1.55 billion) in assets at the end of October, less than 1 percent of Mexico’s total bank assets, according to data from the country’s banking regulator.
Most of its loans are commercial and to other financial institutions, and Popular said it would be investing to help it better develop its business targeted at small and medium-sized enterprises.
“Both groups are looking to develop the market targeted at SMEs and individuals in Mexico and Latin America,” Popular said.
Additional reporting by Jesus Aguado in Madrid; Editing by Julien Toyer and Elaine Hardcastle