MADRID-- Banco Santander SA's shares fell around 11% on Friday,
falling below the price shares were placed at overnight in a EUR7.5
billion ($8.8 billion) capital hike, as some investors reacted
negatively to the sharp dividend cut the bank also announced.
The decline of the Madrid stock exchange's largest company by
market value drove Spain's benchmark IBEX-35 down 2.6% in early
afternoon trade.
Executive Chairman Ana BotíSHYn, who took over in September
after the death of her father, said on Thursday that the share sale
rounds out three issues she set out to tackle when taking the helm:
increasing the number of independent directors on the board,
shaking up the management team, and shoring up the lender's capital
base. Ms. BotíSHYn also said the new capital would help support an
expansion of lending in Santander's markets.
Ms. BotíSHYn "has taken three key remarkable decisions in a very
short period of time, signaling a significant change in Santander's
strategy and corporate policy," Exane BNP Paribas analyst Santiago
López DíSHYaz wrote in a research report on Friday.
Santander's stock fell to EUR6.11 early Friday afternoon,
impacted by two types of investors. Shares priced at EUR6.18 when
1.2 billion shares were sold to institutional investors overnight
in the capital raise.
On the one hand, retail investors and institutional "yield"
investors were selling some of the shares on Friday, put off by the
dividend cut Santander announced on Thursday, analysts said.
Santander is cutting its 2015 dividend to 20 euro cents a share
from the 60 cents it has paid since 2007. It will pay three of the
four 2015 dividend payments in cash.
Retail investors hold 46% of the Santander shares; 52% is held
by institutional buyers and 1.4% by the bank's board members.
"The drop in the reported yield (of the all scrip dividend)
could come as a disappointment to some," Barclays PLC analysts
wrote in a note on Friday.
Santander's stock wasn't pushed down further as some investors
were buying more of the bank's stock, with their concerns about
Santander's weaker capital base somewhat alleviated, analysts
said.
Analysts and investors have long expressed concern about the
weakness of Santander's capital buffer compared with other major
European banks.
Santander said on Thursday in a presentation to investors that
its capital ratio would be around 10% in 2015, under international
regulations known as "fully loaded" Basel III criteria. A bank's
capital ratio is the amount of equity it holds in relation to
risk-weighted assets on its balance sheet, and it provides a buffer
against potential losses.
The bank's capital ratio would have been around 9% at year-end
2015 without the capital raise.
The difference with estimates for 2014 is stark.
The bank estimates that its capital ratio at the end of 2014
would have been 8.3% without the capital hike, compared with 9.7%
taking into account the sale of additional shares.
That is below the 8.5%-8.6% guidance for 2014 that Santander had
given in November in its third-quarter earnings results. Berenberg
Bank analyst Nick Anderson says that difference is a model that was
approved by the regulator in Brazil, where Santander has a major
unit, but "not yet" by the European regulator.
Ignacio Cerezo, Credit Suisse Group AG equity analyst, wrote in
a research note published on Friday that Santander remains "in the
lower end of the European pack" despite the share sale. Still, he
said, "we believe the debate on Santander's solvency is likely to
be put aside for now, this being one of the key positives" of the
capital raise.
"Santander is just catching up in addressing what was, in our
opinion, a clearly undercapitalized position," Exane analyst Mr.
López DíSHYaz said. "It is not that the capital was needed for
growth. The capital was simply needed. Period."
Barclays analysts also highlighted the positive that Ms.
BotASHYn had stressed on Thursday that the fresh capital wasn't
intended to fund a major acquisition.
"We had been concerned that the capital increase might at least
partly be used for acquisitions which would have left Santander,"
Barclays analysts wrote. "Reassuringly, management was explicit on
the call that no major acquisitions are planned in the near- or
medium-term and that the aim of the capital increase is to
accelerate Santander's capital build and to enable it to take
advantage of organic growth opportunities."
Still, Chief Executive José Antonio Álvarez told reporters on
Thursday evening that didn't mean Santander, a lender known for its
deal-making, would rule out all acquisitions.
Mr. Álvarez said the bank would consider deals like ones that
Santander made last year. He cited a joint venture with a payroll
lending company in Brazil and the purchase of a consumer finance
business that operates in Norway, Sweden and Denmark as examples.
Mr. Álvarez said Santander will analyze deals that could bolster
the bank's units in countries where Santander's presence is
weaker.
Mr. Álvarez also reiterated that the bank was looking at Novo
Banco, the Portuguese bank created out of failed lender Banco
EspíSHYrito Santo SA. Santander has a unit in Portugal.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
Access Investor Kit for Banco Santander SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=ES0113900J37
Access Investor Kit for BNP Paribas SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000131104
Access Investor Kit for BNP Paribas SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US05565A2024
Access Investor Kit for Banco Santander SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US05964H1059
Subscribe to WSJ: http://online.wsj.com?mod=djnwires