MercoPress. South Atlantic News Agency

Santander, Euro zone largest bank helped by solid results in UK and Brazil

Chairman Emilio Botin said Santander also wants to list in the Argentine market

The collapse of the Spanish property prices helped pull annual profit down 8.5% at the Euro zone largest bank Santander. Solid results from Brazil and Britain, which each account for more profit than Spain at the diversified bank, failed to calm fears about exposure to a stagnant domestic economy, struggling to shake off the worst recession in half a century.

Shares fell 2% to 8.97 Euros, against a Spanish blue-chip index 1.4% lower and a 2.7% fall in peer BBVA. The stock had risen around 16% over the past three weeks.

Santander delayed the planned listing of its British arm to the last quarter of this year, after previously saying it hoped to list it before July. The delay is not a surprise after recent turbulence in financial markets.

The float would be the highest-profile London listing for nine years, and could net the bank more than 3 billion Euros.

Chairman Emilio Botin told reporters he had asked the Argentine central bank for permission to list its Argentine unit.

Santander has expanded aggressively abroad, but the bank's stock is used as a proxy for Spain by hedge funds. Shares have underperformed European peers by around 14% over the past year.

The aftermath of a property crash and unemployment of over 20%, more than double the Euro zone average, are pushing bad loans higher in Spain and banks have had to put aside more funds to cover for bankrupt debtors and falling property prices.

In addition, risk-averse wholesale markets have pushed up the cost of funding, leading Spanish lenders to start a price war for retail deposits as they compete to secure capital.

Botin said the worst of the financial crisis was over and worries about Spain had been overdone.

“Doubts about Spain are absolutely exaggerated. Frivolous comparisons have been made with other economies whose public finances and financial systems are far more fragile than ours,” Botin said.

Santander's multi-billion Euro spending spree over the past year has raised concerns about capital levels and the bank's ability to withstand a sharp economic downturn following demands from regulators for deeper and better quality capital reserves.

Botin said reinforcing capital would be a priority this year and his bank had the ability to generate the funds it needs from organic business.

Core capital improved by 0.3 percentage points in the fourth quarter to 8.8%, above the Spanish government's new, tougher requirement of 8%. The bank said it expects to end 2011 with core capital above 9%.

Chairman Botin said the bank had absolutely no need to raise capital. But some analysts were wary. “In our stress test, we came up with a 4 billion Euro shortfall, and we still see a decent chance of Santander having to inject some capital” said Juan Cerezo of JP Morgan.