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28th October 2011

Santander can exceed 9% CT1 ratio without going to market

Santander responded to reports that it needed to raise €15bn in new capital as a result of the Euro crisis proposals. It provided analysis showing that the new CT1 (core Tier 1) capital ratio could be generated without going to the market for more money. The bank outlined the following steps that it would take.


The bank agreed that the change to regulatory Core Tier 1 capital was indeed equivalent to a raw difference of €14.97bn. The bank has €8.5bn in mandatory convertible bonds bringing the difference on conversion to €6.47bn. As of September 30th it exceeded the statutory capital by €1.25bn, hence leaving €5,224m difference. Put another way, including the bonds its current ratio is 8.22%. It then forecasts an increase in capital from business generated reserves for the 9 months until the new levels come into force of €2.3bn. It expects to reduce capital requirements by a further €4bn from the role out of a new internal model and optimisation of risk weighted assets. This would give it a CT1 ratio of 9.22% by the June 30th deadline - or an excess of €1,076m. It plans to go one stage further and through proposed asset sale the same capital will then provide a CT1 ratio of 10%.