Spain’s largest bank, Santander, has announced it will absorb its subsidiaries Banesto and Banif and close 700 branches in a move the lender says is in line with the country’s financial restructuring.
The operation, scheduled to be completed in May, will see the disappearance of the retail bank Banesto from the Spanish high street after a 110-year history. The other absorbed lender, Banif, is Santander’s private banking subsidiary. All three entities will trade under the Santander name.
Spain’s banking sector is undergoing a restructure prompted by a crisis caused mainly by the toxic assets inherited from a collapsed property bubble. The European Union is helping Spain’s weaker banks recapitalise while requiring the sector as a whole to shed toxic assets and streamline operations.
‘Profound restructuring’
A recent stress test by auditor Oliver Wyman deemed Santander among the country’s strongest lenders. But the bank’s net profits for the first nine months of 2012 were down 66 per cent on the previous year, at €1.8 billion, as it reduced its exposure to the property sector, and Santander said yesterday it needs to respond to the new financial landscape.
“This operation takes place within the framework of a profound restructuring of the Spanish financial system, which is seeing a deep-rooted reduction in the number of competitors and the creation of larger banks,” the lender said in a written statement.
Under the deal, Banesto shareholders will receive Santander shares at a premium of 24.9 per cent above their own bank’s price.
Shares down
Santander’s shares dipped slightly yesterday, down 1 per cent at close. Banesto closed up 18 per cent, making up much of the ground it has lost on the market in 2012.
Santander’s chairman, Emilio Botín, said the announced fusion underlined the lender’s status as “the most solid and powerful bank in the Spanish financial system.”
“This is a great operation for everyone,” he said in a video statement. “For the shareholders of Santander and Banesto, who receive a 25 per cent premium and shares that have the most attractive dividend on the market; for the clients, who will have access to more than 14,000 branches of the bank across the world; and for our staff.”
Santander said the fusion will lead to total annual pre-tax synergies of €520 million in the third year following the operation. The bank has not specified how many jobs will be cut, but it said that after its planned closure of 700 branches 4,000 will still be operating in Spain.
Banesto, founded in 1902, is one of Spanish banking’s most emblematic names.
