Santander Mexico shares jump in debut, bucking trend
MEXICO CITY (Reuters) - Banco Santander's Mexican unit defied gloom in global markets as its newly listed shares rose sharply on Wednesday after its Spanish parent raised $4 billion in a record issue for Latin America's second-largest economy.
On a day when world stock markets were dragged down by Spanish financial woes, Spain's largest bank saw investors snap up the new stock of its affiliate in a ringing endorsement of the Mexican economy.
The offering of 25 percent of Santander Mexico's shares, which were also listed in New York, was the second largest in the United States this year behind Facebook (FB.O).
Santander Mexico's chief executive, Marcos Martinez, said the offering was subscribed nearly five-fold, and had surpassed expectations.
"We put in a lot of effort, but we are even a little bit surprised because of the response of the investors," he told Reuters in an interview.
However, Martinez ruled out the possibility of issuing more stock, a concern of some investors because it would water down the value of early buyers' holdings.
"No. It was the percentage that the bank has been thinking all the time," he said when asked about that option, adding that the parent company would next work on planned sales in Argentina and the United Kingdom.
Santander Mexico was the most actively traded stock on the New York and Mexican stock exchanges in its market debut.
Banco Santander (SAN.MC) raised an estimated 2.8 billion euros in the share sale to help buffer the parent bank against potential losses from Spain's property crash, in the latest in a series of national unit disposals.
None of the proceeds will go to the Mexican unit, which is well capitalized and has enough of its own resources to finance expansion plans, Martinez said.
Shares of Santander Mexico (SANMEXB.MX) jumped as high as 9 percent above the offer price on Wednesday before settling at 33.33 pesos per share, up 6.9 percent from the offering's debut, while world indices fell sharply as investors fretted about Spain's commitment to reform amid violent protests.
Investors have lately been taking a keener interest in Mexico over Brazil, which had been the region's investment darling, but is now undergoing a soft patch.
Skeptics wondered whether the worsening situation in Spain would force the bank to sell another chunk of Santander Mexico at some point.
"Spain is not going to pull out of its recession easily," said Gerardo Copca, an analyst at consultancy Metanalisis in Mexico City. "(The bank) will put out feelers for a while and I wouldn't rule out another offering, if necessary."
The offering, the largest ever by a Mexico-listed company, was priced at 31.25 pesos in Mexico on Tuesday, valuing Santander Mexico at $16.538 billion (12.78 billion euros).
The New York-listed shares (BSMX.N) traded at $12.91, after pricing at $12.185 in the offering.
Santander Mexico is forecast to grow on the back of projected economic expansion in Mexico of 4 percent this year and 2013, and a growing middle class that is just starting to open bank accounts and take out loans for the first time.
Analysts said the flotation may persuade other Mexican banks to offer shares, and they pointed to Spanish bank BBVA's (BBVA.MC) Mexican arm Bancomer as a likely candidate for a dual listing.
"It's possible that other financial sector players might also decide to do public offerings, which would help provide more depth to the country's capital markets," said Arturo Sanchez, banking analyst with Standard & Poor's in Mexico.
Bank of Nova Scotia (BNS.TO) said this month it may sell minority stakes in some Latin American operations, but officials stressed there were no immediate plans. <ID: nL1E8KBNIV>.
Investors like Mexico's banking system for emerging unscathed from the global financial crisis and for conservative regulations that shield it from systemic meltdowns elsewhere.
Santander Mexico CEO Martinez said local pension funds were the most active buyers in the Mexican part of the offer.
Santander said in a filing with the Mexican exchange that it sold nearly 1.7 billion shares, including the greenshoe overallotment, in a Mexican and international offering worth 52.8 billion Mexican pesos ($4.12 billion).
That was a 65 percent premium to the $2.5 billion Santander paid in June 2010 for the same-sized stake from Bank of America.
Assuming the greenshoe is exercised in full, the issue would push the bank's core tier one ratio - a key measure of its strength - to 10.6 percent. A greenshoe option gives an underwriter the right to sell more shares than originally planned, often if demand proves greater than expected.
The sale price was in the middle of the range of 29 to 33.5 pesos set by the bank earlier this month.
The Mexican tranche accounted for 19 percent of the shares in the global offering, and the U.S. tranche, 81 percent.
Santander's Mexico unit said it sold 319,977,408 shares in its Mexico offering, including the greenshoe, and 1,369,834,925 shares in its international offering, including overallotment.
Shares of the parent bank fell 4.51 percent to 5.924 euros, while Spain's blue chip index Ibex-35 .IBEX declined 3.92 percent.
An independent stress test of Spain's banking sector earlier this year revealed capital needs of 50 billion to 60 billion euros ($77.7 billion) although Santander is widely expected to present a clean sheet.
(Additional reporting by Louise Egan, Jesus Aguado and Michael O'Boyle in Mexico City and Olivia Oran and Herb Lash in New York; Editing by Dave Graham, Simon Gardner and Andrew Hay)
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