She makes decision with a steady hand. Since Ana Patricia Botín took command of Banco Santander, it has become clear that she is a woman of clear ideas, you know, dismissal of former CEO, Javier Marín, and Rodrigo Rato and very recently the last and powerful capital increase needed to meet future requirements penalizing significantly to small shareholders. As an analyst (good or bad analyst, it depends on your estimates, dear reader), I am going to try to synthesize the reasons and consequences of this measure.
First, it is a necessary measure. The SSM (Single Supervisory Mechanism) and its president, Danièle Nouy, seem to be clear that any systemic bank or 'too-big-to-fail' bank should have a capitalization higher than 10% of its balance. Moreover, this requisite seems an essential requirement, and Banco Santander knows it. Keep in mind that many companies still treat certain 'concepts' as Capital, and these concepts should be eliminated in 2019, so you know, the real solvency of many European banks is not what it appears. Basel III imposes very strict standards that many banks have to undertake in the short term because the most important issue for the ECB - today - is the Capital. Capital and Capital. Only the Capital. Solvency.
Solvency is a term that inspires confidence to customers, but also to markets. A solvent bank is able to withstand economic crisis but also, a solvent bank can more easily undertake purchases of other banks. Therefore, some think that this capital increase is a warning to future potential acquisitions, though I think and reiterate that the most important issue is to withstand the crisis - is not over -, and I think Ana Patricia Botín will not make any purchase in the short term. It would be a little daring penalize shareholders to buy another bank, right?
Everyone (yes, you) prefers solvents banks. But who should pay the price for these recapitalizations? As usual, someone does it well and someone does it wrong. And this time, Banco Santander did it well: the shareholders are the owners of the Bank and must bear the capital risk. So chapeau!. I know Mr. Shareholder: your share has been diluted by 10% and the dividend has been reduced to € 0.20 per share, but difficult times require bold solutions. Dear Shareholder, think in the shareholders of Bankia or those that were fooled with unrecoverable preferred participations ... And finally, Shareholder of Banco Santander: A more solvent and strong Banco Santander will regain its value.
But yes, all erroneous and fraudulent actions taken in the spanish banking sector in recent years must be severely punished. Likewise, citizens expect more positive moves, you know, a more humane Banking, because this crisis has been a missed opportunity to change nineteenth-century mortgage and credit laws.
This will be your next national challenge, Mrs. Botín. Your bank must take a step forward to create a more humane Banking business and should encourage the change of this legislation. If you do so, this change would be a brilliant manoeuvre in favour of Banco Santander, and would strengthen its leadership position. If you do not so, the legislation will change, because it is just a matter of time. I hope so, for everyone's sake...