Much talk has been made of European, and particularly Spanish,
banks’ troubles in recent years. But the effects
of the European crisis have yet to have any major impact on
their Latin assets.
For international banks such as BBVA and Santander, these
regional operations represent their crown jewels. The name of
the game has been monetizing assets without pulling out of the
Santander found itself needing to address a €6.47
billion ($10.08 billion) capital shortfall to meet new
requirements imposed by European regulators last year. Its
profits were sagging as well, falling from €8.18 billion
in 2010 to €5.35 billion in 2011. Profits at the Latin
American units have held up well, declining only from
€4.73 billion to €4.66 billion.
Santander has raised a large chunk of capital through the
sale of parts of its best operating assets in the region. The
strategy is still underway, and, when complete, should have
resulted in the IPOs of all of its units in the region that
have not yet gone public.
In December 2011, the bank raised $949 million by floating
an additional 7.8% of its Chilean bank. The sale drew more than
$1.95 billion in orders, and was buoyed by a decision to extend
the lock-up period for the shares to one year. About 70% of the
buyers were international, up from the one-third foreign
participation often seen in Chilean equity deals. The bank,
considered one of Chile’s two strongest along with
Banco de Chile, has a 33% free float.
On the same day of the flotation, Santander made perhaps a
bolder move, exiting completely from Colombia.
The Spanish bank was unlikely to do anything in the
Colombian market, with its unit there holding $4 billion in
total assets, and representing a 2.7% market share in loans and
4.7% in deposits. Financial assets in Colombia have been going
for pricey multiples in the past year, so Santander was able to
raise $1.23 billion by selling the bank to Chile’s
Corpbanca – itself a growing regional player through
These transactions were followed this year by the much
anticipated IPO of its Mexican unit, perhaps the most highly
regarded of its Latin operations in an economy that has become
an investor favorite. The $4.1 billion sale represents
Mexico’s largest-ever IPO and analysts expect it
to prove a boost for equity activity in the country.
With investors putting in for more than three times demand,
the issuer could have priced at the top of the range, but left
some breathing room and came at the midpoint. The sale
represents a 25% float, valued the bank at $17 billion, and
stands out in what has been a poor year for ECM. The shares
have gained more than 20% since the IPO as of late October.
The asset sales should continue. An IPO for Santander Rio,
the largest bank in Argentina, is reportedly also on the card.
Santander has a shelf allowing it to sell an additional 8.2% of
its Brazilian unit, which could bring in about $2 billion.
Struggles in the Brazilian new issuance market may have
compelled the bank to wait.
The outlook for Europe remains uncertain, but Santander has
managed to boost its capital while still retaining a dominant
hold on its successful operations. BBVA, already putting
pension businesses up for sale, is expected to follow suit with
a flotation of its Latin American business.