Stock sale to put Santander unit's shares under pressure in short term - analysts

Tuesday, January 11, 2011

Spanish bank Santander's (NYSE: STD) announcement that it will sell a 1.9% stake in its Chilean unit (NYSE: SAN) through a public offering will likely put Santander Chile's stock price under pressure in the short term due to overhang risk, analysts told BNamericas.

The shares are valued at 153bn pesos (US$305mn), based on their closing price on January 7.

As a result of the sale, Santander's stake in its Chilean unit will decline to 75% from the current 76.9%.

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"It is a never a good sign when the controller sells, mainly as it generates an overhang risk," analyst at local brokerage Banchile Claudia Benavente said.

A Santander Chile spokesperson told BNamericas the transaction aims at maintaining Santander's ownership at 75%, a figure that the group sees as strategic.

The market reacted to the news sending Santander Chile's shares down 3.49% to 40.9 pesos on Monday (Jan 10) from its previous close in heavy trading.

Raul Barros, senior analyst at stock brokerage BBVA Chile's research department, believes the transaction will create selling pressure on the stock given the size of the transaction, but added that he does not see risks for the bank's day-to-day operations.

The sale will be carried out by the Spanish bank's wholly owned subsidiary Teatinos Siglo XXI Inversiones, which has 41.4% stake in Santander Chile, according to a prospect posted on the bank's website.

Financial services firm Celfin banking analyst Barbara Angerstein told BNamericas that the short-term sale pressure does not affect her fundamental view of the bank's shares, adding that there could be an upside to the bank's previous loan growth estimates over the coming 12 months.

Some speculation that the proceeds will be to be used to reinvest in the region is unlikely, as Santander will probably need to use proceeds to shore up its balance sheet, Celfin said in a report.

According to Deutsche Bank (NYSE: DB), the impact on Santander's capitalization ratio should be minor, or around two basis points of its core Tier 1 ratio.

Santander Chile, the country's largest bank, commanded a 20.9% loan market share as of end-November and booked a 125bn-peso profit in 3Q10 for a 29.3% ROE.

Santander Chile's shares fell 0.88% on Tuesday to 40.6 pesos.