The biggest bank in the eurozone by market capitalization, Banco Santander plans to list its UK subsidiary in the second half of 2011.
Santander is planning to expand aggressively into overseas market and the UK listing is part of its growth plan. The parent company survived when the Spanish property market tanked because of its international operations.
Santander group net profit for 2010 was reported at €8.18 billion ($11.1 billion), a decline of 8.5 percent over 2009 – which the bank attributed to writing off charges for bad loans following the crash of Spanish property market.
The banks bad loans as a percentage of total assets went up to 3.55 percent globally in 2010 from 3.24 percent in 2009, while in Spanish market the percentage was up to 4.24 percent in ‘10 from 3.41 percent in ’09.
Santander – like its smaller rival BBVA, benefitted from the gains of its exposure in the emerging markets, which helped it absorb part of its losses from its operations in Portugal and Spain.
Mr. Emilio Botin – the Executive Chairman of the group, said that the bank plans to list in the second half of 2011, subject to market conditions. His announcement puts an end to the market speculation of a further delay because of the defection of Antonio Horta-Osório to rival Lloyds bank last year. Ms Ana Patricia Botin had been appointed as chief executive of UK operations.
Santander UK plans to raise £4 billion by offloading 20 percent of its stake, effectively making the bank the sixth largest in the UK by market capitalization. This will also be the biggest IPO for the London stock exchange since the economic meltdown took place in 2008.
Santander has managed to increase profit in developed markets like the US and the UK, along with emerging markets. In UK its net profit jumped by 10.7 percent to £1.7 billion.
Ms Botin said that the UK bad loans have peaked and the worst is over; however she believes that market conditions will remain challenging for the year. The demand for mortgages was down by 8 percent last year due to weak demand. Due to tougher market regulations and government spending cuts, business is expected to slowdown further this year.
An UK IPO will strengthen the banks capital base further. Mr. Botin said in Madrid that the banks core tier one capital to total Risk Weighted Assets (RWA) ratio will cross 9 percent this year, up from 8.8 percent in December last and about 6 percent three years ago.
Santander has managed to increase its liquidity last year as well and managed to raise €109 billion in new customer deposits. It raised another €38 billion from wholesale financial markets and total deposits were more than double to retire maturing loans and create fresh advances. Mr. Botin said that the bank will not raise any further debt this year.