Trader Talk

Santander Sells Assets Instead of Capital-Raising


Santander says "no way" to capital raising; sells assets instead. Spanish bank Santander announced it has reached the 9 percent capital ratio required by the European Banking Authority, a full 6 months ahead of the June 2012 deadline. It was previously announced there was a shortfall of some 15.3 billion euros.

While many European banks will likely need to raise capital to meet the new capital ratio requirements, Santander appeared to have the largest obligation.

They covered the shortfall using a variety of mechanisms: 1) they converted preferred stock into ordinary shares, 2) transferred convertible stock in Santander Brazil to a "large international bank" (which will allow the bank to count the shares as core capital immediately) 3) sold stakes in its Chilean and Colombian division, and 4) distributed dividends as shares instead of cash.

They reiterated they are seeking to get to a 10 percent capital ratio (above the EBA requirements), which would require an additional roughly 5 billion euro capital raise. They also reiterated they would maintain their dividend.

What about a rights offering like the recently concluded 7.5 billion euro offering from Italian bank UniCredit? Santander's CFO said it was not an option. Instead, he said the bank may sell more non-core assets.

This is certainly a positive for Santander; the stock, along with many other European banks, was under considerable pressure last week (near a 52-week low) on concern it too would have to raise capital through some kind of rights offering.

Bookmark CNBC Data Pages:


Want updates whenever a Trader Talk blog is filed? Follow me on Twitter:

Questions?  Comments?