Banco Santander has agreed to buy back a 50% stake in Santander Asset Management. Santander already owned the remaining 50% stake, which makes it get back full control of its asset management business. The Spanish bank sold a 50% participation in 2013 in a $2 billion deal to two private equity funds, being Warburg Pincus LLC and General Atlantic.
Santander is the biggest Spanish lender with a truly global presence. It has a market capitalization of approximately $66.15 billion (as of November 28, 2016) and total assets worth almost $1.5 trillion (as of June 30, 2016). To get a sense of the magnitude of these numbers, HSBC was ranked 1st in Europe with $2.6 trillion and the French BNP Paribas 2nd with $2.4 trillion.
The Spanish bank has a strong overseas presence. In fact, 35% of the total profits of 2015 came from South America and Mexico. It is worth saying that Brazil was a particularly profitable region for the bank as it generated alone, 19% of Santander’s total profits.
According to the “Wall Street Journal” and the “Financial Times”, Santander Asset Management currently has €173.6 billion assets under management (as of June 30) generating approximately €1.1 billion of annual fees.
The current record low interest rate environment has badly hit margins and overall profits of lenders in Europe. As reported by the Financial Times “Buying back the asset management business suits Santander’s aim of increasing its share of revenue from fee-earning operations, rather than those that charge interest – as the latter have been squeezed by ultra low interest rates”.
The bank expects this transaction to generate more than 1% earnings per share starting in 2018. Potential downsides of this deal include a -0.11% impact to its Tier 1 Capital Ratio. This ratio measures the bank’s financial strength by assessing how well a bank can endure financial distress. Moreover, under Basel III, a bank must have a Common Equity Tier 1 Ratio of 4.5% or greater. The Spanish bank currently has a CET1 a ratio of approximately 10.47%. HSBC, for instance, disclosed in the latest earnings release a CET1 ratio of 13.9%.
Santander was reported to be in merger talks, in 2015, for a transaction involving its asset management business and the Italian Unicredit’s Pioneer. According to the Wall Street Journal, “regulatory issues made it impossible to find a workable solution within a reasonable time horizon”. The deal would have created a new entity with approximately €353 billion under management.
Riccardo Lizzi
Santander is the biggest Spanish lender with a truly global presence. It has a market capitalization of approximately $66.15 billion (as of November 28, 2016) and total assets worth almost $1.5 trillion (as of June 30, 2016). To get a sense of the magnitude of these numbers, HSBC was ranked 1st in Europe with $2.6 trillion and the French BNP Paribas 2nd with $2.4 trillion.
The Spanish bank has a strong overseas presence. In fact, 35% of the total profits of 2015 came from South America and Mexico. It is worth saying that Brazil was a particularly profitable region for the bank as it generated alone, 19% of Santander’s total profits.
According to the “Wall Street Journal” and the “Financial Times”, Santander Asset Management currently has €173.6 billion assets under management (as of June 30) generating approximately €1.1 billion of annual fees.
The current record low interest rate environment has badly hit margins and overall profits of lenders in Europe. As reported by the Financial Times “Buying back the asset management business suits Santander’s aim of increasing its share of revenue from fee-earning operations, rather than those that charge interest – as the latter have been squeezed by ultra low interest rates”.
The bank expects this transaction to generate more than 1% earnings per share starting in 2018. Potential downsides of this deal include a -0.11% impact to its Tier 1 Capital Ratio. This ratio measures the bank’s financial strength by assessing how well a bank can endure financial distress. Moreover, under Basel III, a bank must have a Common Equity Tier 1 Ratio of 4.5% or greater. The Spanish bank currently has a CET1 a ratio of approximately 10.47%. HSBC, for instance, disclosed in the latest earnings release a CET1 ratio of 13.9%.
Santander was reported to be in merger talks, in 2015, for a transaction involving its asset management business and the Italian Unicredit’s Pioneer. According to the Wall Street Journal, “regulatory issues made it impossible to find a workable solution within a reasonable time horizon”. The deal would have created a new entity with approximately €353 billion under management.
Riccardo Lizzi