R will take a five per cent stake in the Brazilian unit of Spanish lender Banco Santander, with a $2.7bn (£1.7bn) investment that adds to its big bank deals in recent years.
Santander, the Eurozone’s biggest bank, will issue bonds to Qatar Holding – the direct investment arm of the Qatar Investment Authority – that are convertible into old or new shares in Banco Santander Brazil after three years. The conversion price is 23.75 Brazilian reales (£9) per share and the bonds have an annual yield of 6.75 per cent in dollars until converted.
The bonds will bolster Santander’s capital by about 25 basis points when converted. Analysts have said the Spanish bank may need to raise capital to boost its balance sheet after a string of deals this year and in the face of tougher new capital rules.
“This deal makes sense for Santander since its latest buys have eaten into capital, but considering the benefit is still three years away, it looks like they also wanted funds to keep expanding in Brazil,” said Nuria Alvarez, analyst at Rent Four.
Qatar bought a £1.75bn stake Barclays in 2008 when the bank was seeking to avoid a taxpayer bailout.