SANTANDER OF Spain, regarded as one of the strongest banks in Europe, unsettled equity markets yesterday by launching a deeply-discounted €7.2 billion rights issue to bolster its capital strength.
Only weeks ago senior executives of the acquisitive bank were boasting of their ability to buy other banks weakened by the global crisis, and insisting Santander did not urgently need capital.
However, by yesterday the pressure to match the capital strength of rival banks bailed out and recapitalised by their respective governments had become too much for Emilio Botín, Santander's chairman, to resist.
Santander will issue 1.6 billion new shares and ask shareholders to take part in a one-for-four rights issue at €4.50 per share, compared with a closing price on Friday of €8.34. The issue, led by Merrill Lynch, is fully underwritten.
Shares in the bank fell 5.04 per cent to €7.92 in reaction.
Mr Botín described the rights issue as a "superb investment opportunity for shareholders", but admitted that Santander was increasing its core capital ratio to 7 per cent from 6.31 per cent in the third-quarter "in response to our higher expectations in the current economic environment".
Santander previously said it would generate more capital from profits and by selling assets. - ( Financial Timesservice)
