GO
Loading...

UPDATE 2-Santander Consumer shares rise 10 pct in debut

Thursday, 23 Jan 2014 | 10:20 AM ET

* Shares hit a high of $26.45, valuing company at $9.19 bln

* Plans to increase equity at U.S. unit by up to $2 bln

* Net gain of 740 mln euros from Santander Consumer USA

* Strengthening balance sheet before ECB stress tests

(Adds details on IPO debut of U.S. unit)

Jan 23 (Reuters) - Shares of Santander Consumer USA Holding Inc, the consumer finance unit of Spanish bank Santander SA, rose as much as 10 percent in their U.S. market debut.

The shares opened at $25.75 on the New York Stock Exchange and touched a high of $26.45, valuing the company at $9.19 billion.

The Spanish lender said earlier on Thursday that it planned to increase the equity of its U.S. holding company by up to $2 billion to back growth plans.

The lender said it would book a 740 million euro ($1 billion) net capital gain from the partial listing of Santander Consumer, which it completed on Wednesday.

Santander, the euro zone's biggest lender by market value, has expanded massively in Latin America and Europe over the last decade and is now looking for pockets of growth in new markets, such as the United States, to make up for weaker business at home.

Like other European peers it is also busy strengthening its balance sheet ahead of banking stress tests due to be carried out by the European Central Bank later this year.

The Spanish bank, which recently said it aimed to double profits in its U.S. banking business by 2016 to $2 billion, did not specify how the capital would be raised.

Santander has in the past transferred capital from the group level to units such as to its UK arm before its business there was due to buy bank branches from Royal Bank of Scotland - a deal that later fell through.

The lender could also use debt instruments to bolster equity in the U.S. unit, subscribing to securities that count towards capital issued by the U.S. holding company, for example.

Santander Holdings USA comprises the newly floated consumer unit and Santander's U.S. banking business, based in the northeast.

Santander said on Thursday that 21.6 percent of the Dallas-based U.S. consumer finance unit had been priced at $24 per share.

With the exercise of the green shoe option, which would increase the shares offered due to high demand, the placement would reach just under 25 percent.

Of that, 4 percent is being sold by the bank, which will leave it with a 60.7 percent stake in Santander Consumer.

The rest of the shares sold belong to other investors such as private equity firms Centerbridge Partners, Kohlberg Kravis Roberts & Co and Warburg Pincus.

Santander Consumer, which offers loans through 14,000 car dealers across the United States, has about $25.6 billion of loans outstanding. As of Sept. 30, about $850 billion of auto loans were outstanding in the United States.

The company has been profitable for the past 10 years, posting net income of about $582 million for the nine months ended Sept. 30.

Santander is also due to list its UK business, although the timing of that flotation, expected for several years now, is unclear.

($1 = 0.7372 euros) ($1 = 0.7372 euros)

(Reporting by Sarah White and Julien Toyer in Madrid and Tanya Agrawal in Bangalore; Editing by Susan Fenton)