Santander's Brazilian Business Raises $8 Billion

Posted by: Mark Scott on October 07

Asian companies are are rushing to tap seemingly insatiable investor appetite through a recent blitz of IPOs in Shanghai, Hong Kong, and other regional capitals. Not to be outdone, Spain’s Banco Santander — the largest bank in the 16-country euro area — is also getting in on the emerging economy act. On Oct. 6, the Madrid-based giant said it raised $8 billion by floating its Brazil subsidiary in New York and Sao Paolo in the largest IPO so far this year.

To put that into context, the deal outshines the $4.3 billion float of Brazil’s Visanet early this year, which itself had been a national record. The cash raising also outmatched a spate of Chinese IPOs (predominantly in the construction and infrastructure sectors) that have raised over $20 billion combined this year alone, according to data provider Dealogic.

According to Santander, the extra capital will be used to expand its Brazilian presence — it’s currently the country’s third-largest bank by assets. It also will shore up Santander’s capital ratio, a key indicator of financial strength. This appears another savvy move by Santander’s canny chairman, Emilio Botin.

After the bank scooped up Brazil's Banco Real in the much-maligned ABN Amro takeover in 2007, the South American country has increasingly become a growth area for Santander. The mortgage market is relatively immature, and Brazil's quick recovery from the global recession is fuelling consumer's spending habits. No wonder, then, that Brazil represented 29% of Santander's net operating income (page 20 in PDF) in the first half of 2009.

By dual-listing the subsidiary in the U.S. and Brazil, Santander also is part of a growing trend towards emerging market IPOs. Data from Dealogic (see below) show seven of the top 10 exchanges attracting new listings this year are from the developing world. Granted, these figures are only up to Sept. 18, 2009 (and therefore don't include Santander's Oct. 6 announcement), but the trend is clear. That should make the likes of NYSE Euronext and the London Stock Exchange -- which already are facing stiff competition for their trading businesses -- stop and think. Their monopoly on IPOs is coming to an end.

Source: Dealogic