Santander boosts its capital by 7,200 million euros
Three weeks ago a report by the American investment bank, Merrill Lynch, said that Santander bank needed to boost its capital by 6,600 million euros and its nearest rival, BBVA, could do with boosting its capital by at least 2,400 euros. The Spanish financial sector rejected the report saying that it was one of the strongest in the world.
However, the announcement by Emilio Botín the Chairman of Santander bank that it was planning to boost its capital with 25% more shares appears to justify the claims made in the report by Merrill Lynch. With this Santander bank will boost its capital to more than 7% compared to just 6.31% which was the figure at the end of the last quarter.
Furthermore if this action had not been taken following the purchase of the Brazilian Banco Real, the American bank Sovereign and the British Banks Alliance & Leicester and Bradford & Bingley, the ratio of capital could have gone down to 5.
87% which is quite low compared to its international competitors which have nearly 9% capital.
Santander, one of the most important bank in the Eurozone will issue 1,598,81 million new shares which will cost 4.5 euros each. The period of subscription for buying shares is between 13th – 27th November and the shares will go on sale on 4th December.
The General Director of Finance at Santander bank has denied criticism that he has been over ambitious in carrying out three purchases since the beginning of the financial crisis.
Santander’s decision to boost its capital could force its Spanish competitors to do the same although both BBVA and the Banco Popular denied that they were preparing similar action because their level of capital was sufficient.
Francisco González of BBVA commented that his bank had opted for a more ‘prudent strategy’ compared to Santander and had decided not to carry out any purchases until the beginning of the crisis.
He said that Santander’s aggressive strategy had ‘consumed capital at the same time as increasing its assumed risks’.