Risky business at Banco Popular

Banco Popular will post a record-breaking 2.3 billion euros in losses this year. The bank will not pay a second-quarter dividend to shareholders, which is another historic decision, as it tries to build its capital reserves by about 50% without state aid.

The board unanimously decided to appeal to shareholders in order to raise 2.5 billion euros that will free them from contingent convertible capital. This will be a risky deal according to Banco Popular CEO Jacobo González Robatto, but it will be backed by a dozen investment banks who are underwriting the deal.

Still, what has happened is a surprise that Banco Popular managing directors should have foreseen.