Liberbank rebounds after regulators ban short sales

Shares up as much as 31%, the most since 2013 debut

MADRID: Liberbank rebounded in Madrid trading after regulators prohibited short selling of the Spanish lender in the wake of a stock plunge last week.

The shares jumped as much as 31%, the most since the bank’s 2013 debut, and were up 28% priced at 86.8 US cents yesterday.

The stock dropped 41% last week after regulators ordered the takeover of competitor Banco Popular Espanol SA following a run on deposits.

Spanish securities regulator CNMV and the European Securities and Markets Authority (Esma) banned the sale of borrowed shares yesterday until July 12, the European authority said in a statement. “Market confidence has deteriorated in relation to a part of the local banking sector,” Esma said, citing CNMV.

A run on deposits at Popular caused liquidity concerns that led the European Central Bank to intervene with a sale that wiped out stockholders and many bond investors.

After Popular’s takeover by Banco Santander SA, investors dumped Liberbank shares amid concerns that Spain’s smallest publicly traded bank faces similar challenges and may need to raise capital.

Yesterday’s rally reduced Liberbank’s decline for this year to 12%. The Bloomberg Europe Banks and Financial Services Index is up 8.1% in 2017.

Popular’s bail-in, “has greatly increased the sensitivity of the Spanish market and of international investors,” Esma said. “There is a risk that possible similar cases could arise in the future.”

Banco de Sabadell SA fell 3.5% last week, while the Ibex 35 index rose 0.6%. Bankia SA rose 3% and Bankinter SA was up 1%.

Liberbank shares fell “in a context where no negative information has been disclosed by the bank” and there is no information pending disclosure, the CNMV said in a statement yesterday. The drop is probably related with the resolution last Wednesday of Popular, the Madrid-based regulator said.

“Liberbank is a solid bank as its solvency ratios exceed regulatory requirements and we have a liquidity position that’s among the best within the Spanish traded banks,” chief executive officer Manuel Menendez said in a statement sent by the bank late on Sunday.

“Recent volatility in the shares has been affected by external elements, of speculative nature, as there haven’t been any facts that justify such an abrupt change in the price of shares.”

The lender, which emerged from the merger of three local saving banks in 2011, was listed two years later. With about 900 branches and 4,000 employees, it does business mainly in regions such as Asturias, Extremadura and Cantabria, the home markets of the founding saving banks.

“The bank is seen as the most risky institution following Popular’s downfall. There are some key differences between their stories,” Carlos Garcia, a research analyst at Kepler Cheuvreux, said in a research note yesterday.

Liberbank has no negative equity, there are no relevant litigation problems and 90% of Liberbank’s deposits are covered by the deposit guarantee fund, he said. Garcia upgraded Liberbank to “hold” from “reduce.” — Bloomberg