Santander hits 1.86 euros, down 90% from highs, amid capital hike and job cuts

Santander at 1.86 euros: the dividend funded by a capital increase

The Banco Santander trades around 1.86 euros, having lost 5% in a single session. An investor from a decade ago might see that number as a typo. The stock was worth nearly 15 euros just over twelve years ago: the cumulative drop, excluding inflation, is around 90%. The recurring question is whether this is a floor or a trap.

Why the Santander stock is falling

The most common explanation concerns the entire banking business, not just the bank. The financial margin—taking deposits and lending money—has narrowed due to years of relaxed monetary policies and low or negative interest rates. This margin is the foundation. Additionally, dormant real estate projects on balance sheets may require loss recognition if they depreciate, with forecasts suggesting around a 10% drop in property values next year. Skeptics argue this impact has not yet been fully accounted for.

Opposing this collapse thesis is another, very Spanish view: the Santander is a systemic entity, and the Government relies on it, so it will not be allowed to fail. However, the counterargument bears the name of Banco Popular. It was also considered the most solvent before being sold for one euro. Size does not miccionan indivisibility, and Abengoa—thought to be dead—has not gone bankrupt. The debate remains stuck on whether public backing is a guarantee or superstition.

Capital increase to pay dividends: how it works

The detail that angers many is the distribution. The entity announced a capital increase of 361,263,360 euros to pay dividends, through the issuance of 722,526,720 ordinary shares worth 0.5 euros each, of the same class and series as those already in circulation. In plain terms: new shares are created to deliver paper to shareholders.

The criticism is direct. Rewarding with new shares and cents dilutes existing investors, as the value is discounted from the stock price without replacing what was lost. Defenders argue that paying a dividend signals confidence, even amid a storm. Meanwhile, the ECB has tied remuneration to capital and a maximum of 15% of profits until September, a limit banks consider excessive but regulators maintain to ensure capitalization.

Santander dividend: amount and timeline

Figures point to a payment of 0.10 euros from 2020 earnings, yielding around 3.9% next year, the highest in the Ibex banking sector according to forecasts, with the sector distributing beyond 4% from 2021 and 7% in 2022. The issue is timing: investors must likely wait until October for regulators to lift restrictions. The Bank of Spain’s scenario offers little optimism: its governor predicts a "tortuous" path and rules out pre-pandemic profitability before 2022. With this outlook, the dividend sounds more like a future promise than cash.

4,000 job cuts and Getnet sale

While debating the euro per share, the entity prepares an Employment Regulation File for up to 4,000 people, with 5,040 positions initially on the table according to union sources. This adjustment coincides with other moves: studying taking Getnet, its Brazilian payment services subsidiary, to the stock market, and ongoing fees that customers notice. Some accounts pay over 240 euros a year in commissions, even for products marketed as stars.

Volatility: a 19% rebound in one day

The story is not linear. A simple press release was enough for the stock to gain 19% in a day, with BBVA rising 16%. No fundamental data explained the jump. Meanwhile, those caught short at 1.66 euros accept the gamble and admit their inexperience. Key reference points for active traders are clear: resistance at 1.84 euros in closing prices and a hard floor at 1.50. Between these limits, the value fluctuates.

With the ECB curbing dividends, a 4,000-person job cut underway, and uncleaned real estate on balance sheets, the 19% daily rebound still does not match the macro picture. The market rewards hype; the balance sheet says otherwise. Where the true floor lies, no one can confirm.