ADRs of Banco Santander, S.A. SAN were down 3% on Monday, after the company announced plans to acquire the commercial banking business of Banco Internacional de Funchal (“Banif”) through its subsidiary, Banco Santander Totta, for €150 million ($163 million).
As part of the acquisition, Santander will acquire most of Banif’s assets and liabilities, excluding problematic assets. In Jun 2015, Banif had recorded €12.8 billion in loans and €6.3 billion in deposits. Notably, Banif is the seventh-largest banking group in Portugal, holding deposit market shares of 37% and 36% in Azores and Madeira, respectively.
The acquisition will likely increase Banco Santander’s market share in Portugal by 2.5% to 14.5% (in terms of loans and deposits). More importantly, the buyout is expected to be modestly accretive to the company’s earnings in 2016. However, impact on capital is predicted to be “immaterial”.
Following the acquisition, Banco Santander Totta will have access to all of Banif’s branches and serve all of its customers.
Notably, Banif has been put on sale by the Bank of Portugal as part of the resolution process to liquidate the bank. Reportedly, a probe by the European Commission into the sufficiency of the company’s restructuring plan for repaying the Portuguese State for the €1.1-billion bailout in 2013, along with unfeasibility of the bank’s voluntary sale, was the key factor behind Banif’s resolution.
The resolution process is estimated to involve €2.3 billion of taxpayers’ money, while €1.8 billion and €489 million will be funded by the Portuguese State and Resolution Fund, respectively.
Foreign Banks Worth a Look
Investors interested in foreign banks space can consider Barclays PLC BCS, Grupo Financiero Galicia S.A. GGAL and Mizuho Financial Group, Inc. MFG. All three stocks hold a Zacks Rank #2 (Buy).
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