Shareholders in Spain’s Liberbank have approved a €500m share issue, which the Madrid-based lender said would allow it to reduce the bad loans weighing down its balance sheet.
Liberbank was the subject of a one month short-selling ban by the Spanish government in June after investors reacted to the near-collapse of its larger rival Banco Popular by selling off its shares.
Liberbank’s market value fell two-fifths in the week after Banco Santander’s purchase of Popular, which prompted investors to look for other banks that could suffer the same fate because of high levels of bad debt.
Its market value of €687m is down 42 per cent since hitting a one-year high in May.
The €500m share sale is expected to be completed after Liberbank’s third-quarter results are published later this year. The move was approved by 99.9 per cent of investors present at its general meeting, which represented 68 per cent of the bank’s total share capital.
The bank said it aimed to reduce its non-performing assets to below 9 per cent of its total loan book and to increase the proportion that are covered by provisions to about 50 per cent.
The foundations that together own almost 44 per cent of Liberbank have said they will at least invest some money in the share issue by selling some rights to reinvest the proceeds, a process known as tail-swallowing.
Other shareholders, including Oceanwood, Corporación Masaveu and Aivilo – which together own about 25 per cent of the bank, have said they will take up their rights.
Liberbank has signed a pre-underwriting agreement for the share issue with Deutsche Bank and Citigroup.