To bolster its capital ratios and liquidity, Santander, the eurozone’s largest bank is planning to issue €2.5 billion of preferential shares. Preferential shares are highly attractive to bank customers and investors, since the interest rates on deposits are far less at 1%. Sensing a good response from clients, the bank is hoping to get the go-ahead from stock market regulator Comisión Nacional del Mercado de Valores (CNMV) imminently.
Under Emilio Botín as Chairman, Santander grew aggressively abroad – especially in the UK, Latin America and the US and has recently slowed down a bit due to global financial crisis. Still, the Spanish banking major’s tier one capital, a key measure of capital adequacy that includes equity, reserves and preference shares, stood at a robust 8.9%.
Banco Bilbao Vizcaya Argentaria, Spain’s second biggest bank, was the first bank to issue preferential shares, through which it had raised €1 billion. Since then, a dozen banks and Cajas – the unlisted regional savings bank, have followed suit, raising approximately €12 billion. Other Spanish retail banks like Pastor and Popular have already strengthened their capital by issuing preference shares.
Santander executives described the planned issue as routine and said it would replace other preference issues, worth €2.35bn, that are being redeemed by the bank after five years, in accordance with normal Spanish practice.
