* Unit will pay dividend, issue subordinated debt
* Deal will strengthen, diversify capital, lender says
* No impact on parent company, lender says
MADRID, Nov 28 Spain's Santander said
its Mexican unit would pay a special dividend and
issue subordinated debt in an operation that would strengthen
and diversify the Latin American bank's capital.
The operation, similar to one carried out by Santander's
Brazilian unit in September, would not have an impact on the
capital of the parent company, a Santander spokeswoman said on
Spanish banks are looking to increase capital ahead of
stricter international regulatory requirements as they battle to
emerge from an economic downturn that pushed up loan defaults.
Although Santander, which earns the majority of its profits
abroad, was less affected by Spain's recession than most, some
analysts believe it could still need to strengthen solvency
ahead of stricter global requirements.
Banco Santander (Mexico) will pay out a special dividend of
between $1 billion and $1.3 billion and issue subordinated debt
worth around $1 billion euros, compatible with the Basel III
international rules, the lender said.
"These operations aim to optimise the capital structure of
the bank and improve profitability," Santander said in a
The spokeswoman could not confirm that Santander would use
the cash from the dividend payment, as a 75 percent shareholder
of the Mexican unit, to underwrite the subordinated debt issue.
In a similar operation in September, Santander used a
one-off dividend payment at its Brazilian unit to buy
dollar-denominated debt, shrinking equity and increasing debt to
improve return on equity, a measure of profitability.
After the payment of the dividend, the unit will have a Tier
1 capital ratio - a measure of solvency - of 12 percent, much
higher than regulatory requirements, the lender said. Its Tier 2
ratio would be around 2.5 percent, it said.
The parent company will subscribe to 75 percent of the
subordinated debt emission, the lender said, in line with its
holding in the Mexican subsidiary which floated on the stock
exchange last year.