Santander’s loyal investors were left with a bittersweet taste, as the capital injection reinforced the potential earnings at the bank, but had the effect of diluting the share value and reducing the value of portfolios by around 10%, even up to 15% in some instances.
This was not the first time such an outcome had happened for investors, as back in 2007, they signed up to a scheme involving convertible bonds of another €7 billion at an attractive interest rate-7.3% the first year as well as an addition 2.75% on the Euribor for the next four years-which could be converted into shares in the autumn of 2012-throughout a myriad of crises-for an end valuation of €12 per share. The eventual losses amounted to around 40% for the investors. The operation drew some CNMV sanctions, with Santander found to have provided inadequate or confusing information, with some unfavourable judgements passed on the bank, although it should be noted some favourable appraisals were given.
Three months on from the 2015 capital increase, the Santander share price has recovered to the € 7 mark, still some way off the price of €7.50 per share seen in September 2014. This owes in large part to the bank’s overall credibility on the markets, in addition to strong P&L statements and the fact that there has been a bull market in the opening quarter of 2015.
In addition to this year’s internal capital increase, the bank has also amended the dividend policy which had been maintained by the former president against all the odds, with dual options of €0.60 per share on new shares or cash. This year saw the allocation of €0.40 (€0.30 optional in the first quarter in cash or shares) and 0.05 in the last two quarters, with the fourth quarter payment coming in cash. In 2016, there is a 5c cash payment earmarked for each quarter. In short, there will be a return to normalised cash dividends that do not exceed 50% of profits.