Santander reclaims Mexican operation

SANTANDER could look to expand further in the US after buying back Bank of America’s quarter share in its Mexican division, an analyst said yesterday.

The Spanish juggernaut paid $2.5bn (£1.7bn) in cash for the 24.9 per cent stake it sold to its North Caroline-headquartered counterpart for $1.6bn in 2003. The confident move brings Santander’s ownership close to 100 per cent and is expected to boost the company’s earnings per share by 1.3 per cent from the first year.

The transaction, due to be completed in the third quarter, will pump up Mexico’s contribution to Santander’s overall earnings from five per cent to seven per cent.

Chairman Emilio Botin said: “The acquisition reinforces Santander’s commitment to Mexico, a country with a very positive outlook for growth, and furthers the geographic diversification of our group.”

But Jean Sassus, a Paris-based analyst at Raymond James, said the end of Santander’s relationship with Bank of America would clear the way for the European player to further extend its reach into North America.

He said: “If you split from Bank of America, it makes your intrusion or your entry into some parts of the US market easier because you’re not competing against your own shareholder any more.”

Sassus said Santander could either build on its Sovereign subsidiary, which provides retail banking on the east coast of the US, or forge a new brand to tap into the Hispanic market in California and the south west.

Santander offloaded the quarter share in its Mexican arm seven years ago due to bolster its capital base in the face of steeply falling currencies in Brazil and Argentina. The sale was part of $7bn of asset divestments in Latin America and Europe between 2002 and 2003.

Shares in Santander had risen 3.9 per cent to €7.6 by late afternoon yesterday.