Specialist lender JV project collapses

One of Australia’s leading non-bank mortgage providers has "formally ceased" discussions to form a joint venture with a Spanish banking giant, following on from controversy at the Spanish bank.

Pepper Group Limited announced in late July last year that it was entering into a 50-50 joint venture (JV) in the Spanish unsecured consumer finance market with Banco Popular.

As part of the agreement, the Spanish lender would have provided a committed, five-year, $100-million equity funding facility to support future growth.

The combined business would have had a total loan book outstanding of approximately $404 million, making it the fifth largest player in the Spanish point of sale (PoS) finance market.

However, less than a year into this process, the lender has now revealed that its discussions to form the JV have collapsed.

In an update, the specialist lender said, “Following discussions between the two parties, it was agreed that it was in the best interests of both parties not to proceed with the joint venture due to a change in strategic priorities.

“As a result, the agreements between Pepper Group and Banco Popular are no longer legally binding.”

Controversy at Banco Popular

The move is perhaps unsurprising given the recent upheaval at the Spanish bank. At the end of last year, it was announced that chairman Angel Ron was to be replaced by former JP Morgan vice-chairman for Europe, Emilio Saracho.

Mr Ron had been in charge of the board since 2004, but faced criticism after the bank saw share value plummet by 95 per cent over a period of five years. The share performance was also a turning point for former CEO Francisco Gomez, who was fired from the bank in July 2016.

More recently, it was revealed that accounts for the year 2016 showed a loss of €3.5 billion, and just last week, it was announced that the chief executive Pedro Larena Landeta will be stepping down from his role “for strictly personal reasons”. However, the announcement of Mr Landeta’s departure came swiftly after an audit by PricewaterhouseCoopers found insufficient loan provisions of more than €600 million in relation to troubled loans, among other items.

Since then, Khang & Khang LLP has revealed that it will be investigating claims against Banco Popular Español, S.A. concerning possible violations of federal securities laws.

The outgoing CEO will continue in his role at the bank until the board names his replacement.

According to Pepper, the change in the Banco Popular's “strategy” led to a “natural conclusion” to the JV talks.

The specialist lender added that it is “committed to its existing consumer finance business in Spain” and “remains enthusiastic about the many lending and servicing opportunities for future growth throughout Europe”.

[Related: Non-bank inks $100m lending deal with banking giant]

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Annie Kane

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