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Spanish banks: Sabadell turns the corner after equity triumph

Just as international institutional investors bought into the Spanish recovery story this summer, Sabadell caught the moment with a €1.4 billion equity deal to shore up its balance sheet and provide for future loan growth. Two Latin American billionaire cornerstone investors ensured the deal’s success and drew other investors’ attention away from the Spanish banking sector’s problems and towards its prospects.

For the finance officials of mid-tier Spanish banks, IMF-World Bank meetings of recent vintage have been stressful occasions for fielding endless questions from concerned regulators, creditors and investors about the Spanish economy, the trend in their own banks’ non-performing loans and their access to funding and capital.

Last month, Alberto Coll, deputy chief financial officer of Banco Sabadell, speaking to Euromoney on his return from Washington, still sounded a little shaken by his encounters at this year’s meetings. It wasn’t the endless interrogations around asset quality, provisioning levels and market access that had surprised him this time: rather it was the frequent congratulations over a smartly structured €1.4 billion two-tranche equity-raising the bank completed last month, which garnered strong support among institutional investors from outside Spain.

That’s an important signal. During the crisis years, the share registers of Spanish lenders had come to be dominated by domestic retail holders as foreign and institutional money managers abjured their risks. This equity deal, if it should denote a shift in that flow of capital, might have positive implications far beyond its bolstering of Sabadell’s own balance-sheet defences.

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