* Shares hit a high of $26.45, valuing company at $9.19 bln
* Santander plans to boost equity at U.S. unit by up to $2
* Net gain of 740 mln euros from Santander Consumer USA
* Strengthening balance sheet before ECB stress tests
(Adds details and analyst comment)
By Tanya Agrawal
Jan 23 Shares of Santander Consumer USA Holding
Inc, the auto-finance unit of Spanish bank Santander SA
, rose as much as 10 percent in their U.S. market debut
as investors expect the company to benefit from rising auto
Auto sales are expected to increase by 1 million to 15.5
million vehicles in the United States this year, with
manufacturers expecting some of their highest sales since 2006.
"Auto loans have proved to be a good asset class through the
credit crisis and are attractive in terms of higher yields and
lower credit risk," said Peter Routledge, analyst with National
Santander Consumer offers loans through 14,000 car dealers
across the United States and has about $25.6 billion of loans
outstanding. A majority of the company's loans are subprime,
which have higher yields but also higher default rates.
As of Sept. 30, about $850 billion of auto loans were
outstanding in the United States.
Banks such as PNC Financial, Capital One Financial
Corp and Toronto-Dominion Bank as well as
smaller credit unions have been expanding their auto-lending
Santander Consumer's shares opened at $25.75 on the New York
Stock Exchange and touched a high of $26.45, valuing the company
at $9.19 billion. The offering was priced at $24 per share.
The company, which lends mostly to the used car market, is
also pushing into loans for new cars, entering into a 10-year
agreement with Chrysler Group LLC in 2013 as the
Santander Consumer has been profitable for the past 10
years, posting a net income of about $582 million for the nine
months ended Sept. 30.
The strong debut of Santander Consumer bodes well for other
big financial services companies expected to list this year.
Ally Financial Inc, majority owned by the U.S.
government, is hoping to go public this year while General
Electric Co plans to spin off of its credit card unit.
IPO activity surged last year as low interest rates and a
surging stock market enticed investors. Companies raised $159.7
billion from IPOs globally, a 37 percent increase on 2012, and
bankers expect 2014 to carry on where 2013 left off.
Santander, the company's Spanish parent and euro zone's
biggest lender by market value, has expanded in Latin America
and Europe over the last decade and is now looking for pockets
of growth in new markets, such as the United States, to make up
for weaker business at home.
The Spanish lender said earlier on Thursday that it planned
to increase the equity of its U.S. holding company by up to $2
billion to back growth plans.
The lender said it would book a 740 million euro ($1
billion) net capital gain from the partial listing of Santander
Like other European peers, Santander is also strengthening
its balance sheet ahead of banking stress tests due to be
carried out by the European Central Bank later this year.
The offering consisted of 21.6 percent of the Dallas-based
U.S. consumer finance unit, and would reach just under 25
percent with the exercise of the green shoe option.
Of that, 4 percent is being sold by the bank, which will
leave it with a 60.7 percent stake in Santander Consumer.
The rest of the shares sold belong to other investors such
as private equity firms Centerbridge Partners, Kohlberg Kravis
Roberts & Co and Warburg Pincus.
Santander is also due to list its UK business, although the
timing of that flotation, expected for several years now, is
($1 = 0.7372 euros)
(Reporting by Sarah White and Julien Toyer in Madrid and Tanya
Agrawal in Bangalore; Editing by Susan Fenton)