• Banco Santander, S.A. – a hole in the dyke?

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    santander_logoUnnamed sources are reporting that the board of Banco Santander, S.A. are working on the details to split the conglomerate in two. Readers will know that the Spanish bank took over Abbey PLC in 2004 and in September 2008 bought the remnants of the bankrupt Bradford & Bingley and a month later took over Alliance & Leicester. This January 2010 these old British High Street names disappeared under a corporate rebranding exercise and became Santander.

    Santander is the second-biggest banking group in the world after HSBC. It is therefore Spain’s major financial institution.

    It now appears that the institutional investors who make up the majority of shareholders and who effectively own – and therefore control – the conglomerate are planning to divide the banking giant into two separate and distinct entities: Banco Santander, S.A. which will continue as the Eurozone’s largest bank and Santander PLC that will become a U.K. bank registered in England with its shares denominated in Sterling and floated on the London stock exchange. With a market capitalisation of around £15 billion it will immediately be a FTSE 100 company.

    In addition it is also rumoured that the new bank may be interested in acquiring some of the branches that the state assisted banks, Lloyds and RBS are being required to sell to comply with the dictates of the European Union. It is also possible that Santander PLC would be wishing to acquire one of the four private banking subsidiaries:
    * Adam and Company
    * Child & Co
    * Coutts & Co.
    * Drummonds Bank
    acquired by RBS during the expansion under “Fred the Shread.”

    Such an acquisition would complete the marketing makeup for the new Santander PLC as unlike the other major banks it does not have a developed arm for the very wealthy.

    Many readers who did not hold Abbey shares and therefore do not have shares in the Spanish bank may well ask; “What has this to do with me?”
    The answer to that question is nothing directly but it is a sign – a very distinct sign – that the skids are under the Euro. And that will affect you as the U.K. economy will be caught in the tailwind.

    It is a fact that one of the golden rules that institutional investors and their fund managers follow is to “spread the risk”. For the fund manager, Andrew Carnegie’s dictum of; “putting all the eggs in one basket and watching the basket…” is an anathema. It therefore from a fund manager’s point of view makes very sound financial sense to protect the value of their [considerable] holdings by splitting them into one Eurozone bank and one Sterling zone bank.

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