Santander to boost capital and cut dividends in Botin shake-up

Thu Jan 8, 2015 12:09pm EST
 
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By Jesús Aguado

MADRID (Reuters) - Santander's (SAN.MC: Quote) new chief Ana Botin continued her shake-up of the Spanish lender on Thursday with plans to boost its capital with a 7.5 billion euro ($8.8 billion) share sale and a cut to its dividends.

The euro zone's biggest bank had long been under scrutiny over its capital levels and had stuck to what some analysts said was an overgenerous dividend policy in the years since the 2007 global financial crisis.

"I think it's the right thing to do. They needed to strengthen their capital base," said Francois Savary, chief investment officer at Swiss bank and fund management group Reyl, which owns some Santander shares.

Santander has weathered a deep economic crisis at home in recent years, helped by revenue from key overseas markets such as Brazil and Britain. The bank, which has several listed subsidiaries including in the United States, had previously resisted calls for it to raise cash from shareholders.

The capital increase through an accelerated share placing surprised some investors and is the latest sign that Botin is stamping her mark on the bank after taking over from her late father, Emilio, who ran Santander for 28 years until his death last September.

But analysts have long questioned whether the Madrid-based parent bank should beef up its finances.

It passed a health check of European banks last year, but its capital strength was weaker than peers including BBVA (BBVA.MC: Quote) and BNP Paribas (BNPP.PA: Quote). However, it fared better than others, including Deutsche Bank (DBKGn.DE: Quote), under a recession scenario used for the European Banking Authority's estimates.

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People walk past a Banco Santander branch in downtown Rio de Janeiro August 19, 2014. REUTERS/Pilar Olivares