When Banco Santander sneezes, Europe catches cold. So when, last November, the euro-zone's largest bank, announced a €7.2bn rights issue, only days after saying it was not considering a capital increase, the markets braced themselves for the worst. But unlike several casualties of the European rights issue jamboree, Santander's swift, albeit unexpected, action helped ensure the success of its capital raising. "This demonstrates Banco Santander's ability to act quickly, strengthening its core capital to approximately 7%, which is especially important in the current economic scenario," says chairman Emilio Botin. The rights issue came in response to investor concern about capital dilution after a recent string of acquisitions, including UK mortgage lenders Alliance & Leicester and Bradford & Bingley, as well as bidding for the remaining 75% it does not already own in US bank Sovereign. A high-ranking Santander executive explains further: "The injections of government equity into 17 of the world's top 20 banks distorted the level playing field. Santander was determined to remain among the strongest banks. It is worth noting that this was the first capital raising through a rights issue successfully completed since the fall of Lehman Brothers last September."
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