Botin points to Brazil, capital as driving Santander share slump

MADRID – Investors are overestimating Banco Santander SA’s capital needs and the threat that Brazil’s economic downturn poses to profit, executive Chairman Ana Botin said in a letter to shareholders.

Santander’s shares have dropped 36 percent since the day after it tapped stockholders for 7.5 billion euros ($7.6 billion) in January 2015, among the worst performers tracked by the STOXX 600 Banks Index.

“This is probably related to a different perception of the strength of our capital and the extent of our regulatory capital buffers and to the concern about our presence in certain emerging markets,” Botin said in the letter posted on the bank’s website as part of its annual report.

She said the bank, Spain’s largest by market capitalization, benefits from relatively stable earnings and a loose-knit business model, making it less susceptible to economic shocks than competitors and easier to wind down in a crisis.

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Since taking over from her late father Emilio in 2014, Botin has cut dividends, overhauled management in main markets and set out a plan to keep clients coming back for business.

“There is always a lot of noise in finance, but the strong, underlying signal coming from Santander is of steady growth and value-building,” she wrote. “I am convinced that our share price will eventually come to reflect this and our shareholders’ patience will be rewarded.”

Santander’s capital ratio stood at 10.05 percent at the end 2015, the lowest among the 17 largest European banks that have already reported the data. Botin is seeking to increase the measure to more than 11 percent by the end of 2018.

She also reaffirmed her confidence in Brazil, where an economic downturn is compromising the source of 19 percent of Santander’s profit.

“The long-term story of Brazil is the growth and development of one of the largest emerging economies in the world,” she said. “We are going to endure the current situation, be patient and be strongly positioned when Brazil resumes its upward journey.”

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