Ana Botin sets out Santander vision with drive to raise capital

MADRID – Banco Santander SA Chairman Ana Botin is seeking backing from investors to raise as much as 7.5 billion euros ($8.9 billion) in new funds as she shapes her vision for Spain’s biggest bank less than four months after taking over.

Santander’s board today approved the sale of shares and a cut to the dividend her father Emilio put in place in 2007, before the financial crisis took hold. The bank also announced its 2014 earnings, saying net profit last year grew by more than 30 percent to 5.8 billion euros.

Botin, named chairman in September after her father’s sudden death, is strengthening capital amid investor concern that the lender’s buffers aren’t as strong as those of some competitors. As Santander comes under the regulatory purview of the European Central Bank, her decision signals a change of course from her father, who considered the bank sufficiently capitalized for its consumer-based banking business.

“We are a new team, we bring new ideas, and that is what I think is critically important to explain why we are raising this capital now,” Botin said on a call with analysts today.

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There is already sufficient interest from investors to cover the full sale, CEO Jose Antonio Alvarez said in a news conference today. Santander is offering shares for 6.18 euros to 6.50 euros apiece, the terms show, in a sale managed by Goldman Sachs Group Inc. and UBS Group AG.

No acquisitions

The shares were trading at 6.856 euros, valuing the bank at 86.3 billion euros, when they were suspended in Madrid today before the announcements. The stock fell as much as 6.8 percent in U.S. trading.

“The former management always maintained that they didn’t want or need to raise capital,” said Benjie Creelan-Sandford, a banking analyst at Macquarie Group Ltd. in London. “It reflects well on the new management that they have finally grasped the nettle and are taking steps to address the capital issue.”

Santander will use the funds to expand its business and lending in markets where it already operates and economies are improving, Botin said, adding that Spain’s crisis was at an end.

Botin said the bank had no plans to make acquisitions because it sees a “huge opportunity internally.” Her stress on growing without purchases also marks a step-change from her father who spent more than $70 billion on acquisitions after taking on the chairmanship in 1986.

‘Straight-shooter’

Santander will have a core capital ratio taking into account full implementation of Basel III rules of 10 percent this year, up from an estimated 8.3 percent at the end of 2014, the bank said.

Since taking over from her father, Botin, 54, ousted former CEO Javier Marin in November to promote Alvarez. The lender faces tougher competition and stricter regulation, she has signaled.

“While the previous management had said the bank was fine on capital, the investment community felt differently, and with the ECB as a regulator the bank may have less bargaining power,” said Inigo Lecubarri, who helps run the Abaco Financials Fund.

Santander will switch its dividend to four payments of 5 cents each with three in cash. It previously paid 60 cents a year in four payments offered in the form of stock.

The change will become effective from the first dividend to be paid against 2015 earnings. In subsequent years, the dividend will be aligned with earnings growth with the goal of a cash payout of 30 percent to 40 percent compared with 20 percent now.

Alvarez told reporters in a news conference today that the bank hadn’t come under pressure from the ECB to raise capital.

“Botin wants to show she has a new way of doing things,” said Lecubarri. “She’s a straight-shooter, and someone who likes to be the first-mover.”

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