Santander has led the way in spin-offs
For HSBC, the decision to consider a separate listing for its UK operations may mark a radical departure. Yet for Banco Santander, the Spanish retail banking group, it has become almost a way of life. Over the past four years, Santander has listed swaths of its far-flung banking empire on local stock markets, helping to bolster the group’s capital at a time of severe financial stress in its home market. In 2009, it raised $7bn by listing 14 per cent of its operations in Brazil, widely seen as the jewel in the bank’s foreign operations. That move was followed by a partial spin-off of its business in Chile. Last year, at the height of the banking crisis in Spain, Santander decided to list 24.9 per cent of its lucrative Mexican business in one of the largest IPOs of the year. The offering raised €3.2bn in fresh capital, valuing the entire branch at €12.73bn at the time of the sale. Santander is also in talks to list its car finance unit in the US, and has signalled repeatedly that it wants to list its UK operations, though it has veered away from doing so in the near future. Santander describes this set-up as the "model of subsidiaries", in which listed foreign branches are legally independent and autonomous in capital and liquidity. The bank argues that this approach reduces systemic risk by limiting contagion in a crisis, and provides a strong incentive to local management. Most analysts believe, however, that the flurry of partial spin-offs was above all else Santander’s response to the financial crisis in Spain – and the corresponding need to bolster the bank’s capital position at a time of unprecedented market scrutiny.