MADRID – Santander, Spain's biggest bank, has acted twice in less than 24 hours to restore investor confidence with the announcement of solid 2008 results and a plan to reimburse clients who lost money to the alleged fraud by US broker Bernard Madoff.
The bank offered late Tuesday to repay the EUR 1.38 billion which its private clients invested in a Madoff-linked fund in the form of Santander preference shares, in the first such move by a bank.
Diego Barron, an analyst at Fortis Bank in Madrid, said Santander made the offer to reimburse its clients who lost money to Madoff to neutralise "a risk to its reputation".
"They did not have to do it," he told AFP, adding the bank's 2008 results "were in line with our expectations and seeing that they did not have additional loses was good news".
Santander was making the offer "to preserve the value of the franchise," the bank's finance director Jose Antonio Alvarez told the Financial Times.
A bank spokesman said the offer would not be extended to institutional investors who put money into Santander's Optimal Strategic.
"Private clients have a long relationship with the bank which we want to preserve," he told AFP.
Earlier on Wednesday the bank announced it has its annual net profit for 2008 would be EUR 8.87 billion, a 2.0 percent decline from the record profit of EUR 9.03 billion it posted in 2007.
The bank, which will publish full 2008 earnings on 5 February, also said it would keep its 2008 dividend at the same level as that of 2007.
The market reacted positively to Santander's news on Thursday. Shares in the bank closed up 13.39 percent at 6.52 euros, outperforming the benchmark Ibex-35 most traded share index which closed with gains of 4.22 percent.
Santander announced its compensation plan one day after a Spanish law firm filed a class action suit against the bank at a US court in the name of investors who say they lost money by investing in the Madoff-linked fund.
The bank said the offer will cost it EUR 500 million, a figure which will be entirely absorbed in the bank's results for 2008.
Analysts have said the bank's link to the Madoff scandal had tarnished Santander's image, particularly in Latin America which is key to its growth strategy and where it already has a strong presence.
Santander counts some of Spain's richest people as its private clients, as well as a high number of Latin American investors, especially from Argentina, Brazil and Mexico, according to media reports.
Madoff, a former chairman of the Nasdaq stock market, was arrested last month after allegedly confessing to a 50-billion-dollar pyramid fraud.
The thousands of victims who lost money investing with him include Hollywood celebrities, big hedge funds, international banks and charities in the United States, Europe and Asia as well as ordinary people.
2 February 2009
text: AFP / Fabien Zamora / Expatica
photo credit: AFP
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Swift actions taken by Spain’s biggest bank may just help restore investor confidence.
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