Shares in Spain's Santander tumbled more than 10 percent on Friday after the bank sold €7.5 billion of new shares at a steep discount to improve its capital strength and fund growth.

The euro zone’s biggest bank announced the quick-fire share sale late on Thursday and sold 1.2 billion shares at €6.18 apiece, at the bottom of the indicated price range and a 10 per cent discount to its previous share price.

The shares were down 10.9 per cent at €6.11 earlier, which dealers blamed on the pricing of shares at the bottom of the range, the dilutive nature of the extra shares and the sheer size of the offer in the market.

However some investors and analysts were supportive of the move. Davide Serra, founder and chief executive of hedge fund Algebris Investments, tweeted: "Smart decision. Build Fortress Capital to take advantage distressed assets and Growth if surprises. Win/Win. Ahead of the curve."

In a break from the past, Santander's new chief Ana Botin unveiled the share sale and cut the bank's dividend to lift its capital strength and fund expansion.

It was the latest sign Ms Botin is stamping her mark on the bank after taking over from her late father, Emilio, who ran Santander for 28 years until his death last September.

Capital levels at Santander have long been under scrutiny, but the bank had resisted calls to improve it by raising cash from shareholders. Santander said the cash will be used to grow in its key markets, including Spain, Brazil, Britain and the United States. But the fundraising still prompted speculation it could look at acquisitions, with Italy's Monte dei Paschi and Portugal's Novo Banco seen as possible targets. Goldman Sachs and UBS were joint bookrunners for the share offer, one of the biggest accelerated bookbuilds ever in Europe.

Reuters