Banco Santander SA, Spain’s largest bank, said it plans to sell shares for as much as 7.5 billion euros ($8.8 billion) and will cut its dividend, reducing the payout it had offered investors since 2007.
Santander’s board Friday approved the sale of shares and a cut to the dividend Chairman Ana Botin’s father Emilio put in place in 2007, before the financial crisis took hold. Shares were suspended in Madrid by the Spanish market regulator and dropped 7 percent in the US, Bloomberg reported.
Botin, in the role for less than four months, is looking to strengthen the bank’s capital as investors have expressed concerns that the lender’s buffers aren’t as strong as those of its competitors. Santander’s decision to seek funds may signal a change of course from the line taken by her late father, Emilio Botin, who considered the bank sufficiently capitalized for its consumer-based banking business.
“Santander was a bit short of capital compared with other big banks,” said Filippo Alloatti, who helps oversee about $44 billion as an analyst at Hermes Fund Managers in London.
Accelerated Offering
Santander’s statement came after Bloomberg News reported that a capital increase was being considered. The sale will run as an “accelerated” process, the bank said.
Santander is the largest accelerated share sale in Europe “by a wide margin,” said Christoph Stanger, co-head of equity capital markets for Europe, the Middle East and Africa at Goldman Sachs Group Inc., which is working on the sale with UBS AG. “Investors from all over the globe have shown interest and we have some very large individual orders, billion-dollar orders.”
The decision to be the first out in the year and act in overnight format “avoids the bank being tied up in long processes, lengthy exposure to market risk and deep discounts associated with rights issues,” Stanger said.
Santander will switch its dividend policy to four payments of 5 cents, with three in cash, from 60 cents per share in four payments offered in the form of stock. The change to the dividend policy will become effective from the first dividend to be paid against 2015 earnings.
