Santander, Spain’s biggest bank, has acted twice in less than 24 hours to restore investor confidence with the announcement of solid results last year and a plan to reimburse clients who lost money to the alleged fraud by US broker Bernard Madoff.
The bank offered late on Tuesday to repay the 1.38 billion euros (US$1.82 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 neutralize “a risk to its reputation.”
“They did not have to do it,” he said, adding that the bank’s results last year “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 said.
Earlier on Wednesday the bank announced it has its annual net profit last year eached 8.87 billion euros, a 2 percent decline from the record profit of 9.03 billion euros it posted in 2007.
The bank, which will publish its full statement next Thursday, also said it would keep its dividend at the same level as that of 2007.
The market reacted positively to Santander’s news. 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 would cost it 500 million euros, a figure which will be entirely absorbed in the bank’s results for last year.
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, media reports said.
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