Santander Aims to Boost Capital Buffer
September 23 2015 - 4:54AM
Dow Jones News
By Jeannette Neumann
MADRID-- Banco Santander SA on Wednesday said it aims boost the
capital its sets aside to cover future potential losses amid
investor concerns about the strength of its balance sheet.
Santander, Europe's No. 2 bank by market value, said it is
targeting a capital ratio of 11% by 2018. Its common equity Tier 1
"fully loaded" capital ratio was 9.8% as of June and it had set its
sights on 10% by the end of this year.
A bank's capital ratio is the amount of equity it holds in
relation to risk-weighted assets. Concerns about Santander's
capital levels have dogged Executive Chairman Ana Botín despite a
EUR7.5 billion share sale in January of this year.
While investors are likely to welcome the Santander move, the
pace of improvement may disappoint some.
The latest target is below the 11.8% that Exane BNP Paribas
analyst Santiago López Díaz said he expects for the broader
European banking sector this year. "The problem is that the current
capital position leaves, in our view, limited room for
flexibility," Mr. López Díaz wrote in a research report.
Santander announced the 11% target in a regulatory filing
Wednesday as it kicks off a two-day presentation in London with
investors and analysts.
Investors and analysts have said they are eager to hear comments
from Ms. Botín about how the bank is coping with Brazil, whose
economy has entered its deepest economic downturn since the global
financial meltdown of 2008-09. The country is one of the bank's
biggest profit drivers.
To bolster its capital base, some analysts have said Santander
should sell off units that haven't performed as robustly in recent
years. Also, investors and analysts have said they want Santander
executives to clarify the bank's strategy on mergers and
acquisitions at the two-day London event.
"M&A has been the key driver of growth and capital
generation at Santander in recent year," Carlos García González, an
equity analyst at Société Générale wrote in a research note. He
estimates that under Ms. Botín's predecessor, her late father
Emilio Botín, Santander had spent more than $100 billion on
acquisitions in the past decade-and-a-half. Ms. Botín has said she
would focus on loan growth, rather than buying new banks, but still
bid for smaller lenders in Brazil and Portugal in recent
months.
"We believe guidance on the M&A strategy and the type of
targets/markets of interest would reduce uncertainty," Mr. García
González wrote.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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(END) Dow Jones Newswires
September 23, 2015 04:39 ET (08:39 GMT)
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