MADRID (Reuters) - Alfredo Saenz, 70-year-old chief executive of the euro zone's biggest bank, Santander (SAN.MC), stepped down on Monday after a prolonged legal battle over whether he should be barred from banking due to a criminal conviction.
Saenz was under intense pressure from Spain's central bank, which was looking into whether he was fit to continue as a banker under new rules that give the regulator wide discretion when deciding such issues.
Santander said in a statement that Saenz, who has worked closely with chairman Emilio Botin for 20 years, was stepping down voluntarily and thanked him for his work at the bank, which has quadrupled in size over that time.
In an extraordinary meeting on Monday, Santander's board named Javier Marin, a 46-year-old Botin confidante who has held several executive positions within the group, as the bank's new chief executive.
Saenz was seen as a skilled retail banker, while Botin was the dealmaker. Together they transformed the bank from a regional lender to an international powerhouse.
Saenz was one of the few Santander executives that Botin would delegate to, according to a source who has worked with upper management at the bank, and the chairman had publicly defended the CEO and resisted pressure for him to step down.
A source with knowledge of the proceedings said Santander had had a number of conversations with the central bank over Saenz and his successor. "Saenz's voluntary resignation is a non-traumatic close to this chapter," the source said.
Saenz's stepping down lets the central bank off the hook in making a tough decision after a number of conflicting decisions by courts and the government.
"This is a very positive decision for banking stability and for Santander," a central bank source said.
Saenz was convicted in 2009 for making false accusations against debtors in 1994 when he headed Banesto bank, which is now part of Santander. He was sentenced to a brief time in jail, but that was suspended.
Santander did not say how much Saenz would be compensated on leaving the bank, but his accumulated pension rights are just over 88 million euros ($115 million), according to the bank's audited accounts.
Santander's enormous international expansion over more than a decade has only somewhat shielded it from a financial and economic crisis in Spain, where the banking sector was crippled by the collapse of a housing bubble in 2008.
Flagging income in Brazil and a recession in Spain dragged down the bank's first quarter profit by 26 percent.
The bank's shares, which have lost 9 percent so far this year, were up 1.64 percent at 5.5 euros after the news on Saenz, outperforming the European bank sector index .SX7P, which was up 0.5 percent.
"The change in CEO does not come as a surprise, given the legal pressure on him to resign, but the appointment of Javier Marin as new CEO is unexpected," said Francisco Riquel, analyst with N+1 brokerage in Madrid.
"That said, he has the youngest profile of the top management ... he has worked very closely with and has the full trust of Chairman Mr. Botin. In this context, we do not expect meaningful changes in the strategic guidelines of the bank."
The Bank of Spain put Saenz in charge of troubled lender Banesto when it was nationalized in 1993 for fear that it would collapse after the discovery of an equity shortfall. Santander kept him on as chairman after Banesto was bought by Spain's biggest bank in 1994.
He continued as chairman of Banesto until 2002 when he was named vice chairman and chief executive of Banco Santander.
Saenz closed international branches, sold off industrial holdings and focused on Spanish retail banking to sculpt Banesto into the domestic arm of Santander, while the parent group expanded aggressively abroad.
During Saenz's tenure as chief executive, Santander grew in assets to 1.25 trillion euros from 358 billion, and in managed funds to 1.38 trillion euros from 453 billion.
Given Botin's advanced age there has been a good deal of speculation over who will succeed him at the helm, but Saenz had largely been ruled out as a candidate due to both his age and his legal problems.
After his 2009 conviction, he appealed, and former Socialist Prime Minister Jose Luis Rodriguez Zapatero pardoned him in 2011.
The Supreme Court in February this year partially overturned the pardon, opening the door to the central bank's barring Saenz from banking on the grounds that the criminal conviction made him morally unfit.
The central government on April 12 passed new rules that gave the central bank wide discretion in deciding the issue. That seemed to give Saenz a reprieve - since a conviction was no longer an automatic trigger for being barred from banking - but the central bank then opened new proceedings in the matter.
Santander's new CEO, Marin, has served as executive vice president of global private banking and asset management and insurance at Banco Santander SA since November 2009.
He joined the Bank in 1991. After serving in various positions within the group, he became executive vice president of global private banking in 2007.
Despite being under pressure to shed businesses and raise capital at a time of rising bad loans and defaults in Spain, Santander has shown interest in expanding in some areas, including possibly the private bank and asset management side that Marin is from.
Additional reporting by Julien Toyer, Tracy Rucinski and Sonya Dowsett; Writing by Fiona Ortiz; Editing Will Waterman