Banco Santander pays dividends instead of building cash reserves

Posted 12/27/11

LONDON – As a meltdown in the European financial services sector seems to become more likely every day, some banks – including Sovereign Bank parent Banco Santander – don’t seem to be taking the situation seriously enough, says a piece in The New York Times in a piece last week.

According to the Times’ story, Banco Santander is preparing to pay out dividends worth at least 2 billion euros in cash and even more in stock, even as one estimate says that the bank will need to raise 15.3 billion euros to meet new capital requirements brought on by the banking and sovereign debt crisis in Europe.

The bank’s chief financial officer, Jose Antonio Alvarez, is quoted in the story saying, “Our divident is a sign of our expected future profits. Unless our expectations change we try not to cut the dividend.”

This approach contrasts with American banks, which cut dividends and horded cash during the worst moments of the 2008-09 financial crisis.

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