Banco Popular shares sink amid speculation it might be wound down

Shares in Banco Popular continued to reel as speculation mounted that it would not be able to find a buyer or that it might be forced into a deeply discounted rights issue.

The day before the struggling Spanish lender had postponed the deadline for bidders to submit their offers from 10 June to the last week of the month.

According to the lender, the decision was taken in order to gain time and in order to increase the transparency of the process.

However, Spanish daily El Pais reported that it was due to a lack of interest from potential suitors.

The news of the postponement sent the shares lower by 6% on 31 May.

Piling the pressure on the Madrid-based lender´s stock, that same day Reuters reported that the European Union's Single Resolution Board had warned of the risk that Popular might require an orderly wind-down.

Popular's directors were expected to decide on whether to pursue a merger with a rival or proceed with a rights issue and asset sales at their board meeting in June.

Against that backdrop, analysts at Madrid-based Bankinter reiterated their 'sell' stance on the shares.

"We continue to be of the opinion that the risks are very high," they said.

The same analysts also pointed out how short-interest in the shares was continuing to climb higher, with 12.06% of its shares out on loan to short-sellers.

As of 1025 BST shares in banco Popular were down by 9.36% to €0.55.