Spain's Banco Santander is to offer perpetual bonds as part of a commercial offer to compensate some retail clients who acquired shares and subordinated debt of Banco Popular and were wiped out when the bank was wound down. Silvia Antonioli reports.
There are ways and ways to foster customer loyalty. Santander plans to do so with a 1-billion-euros perpetual bond scheme to compensate retail clients who lost out in the rescue of Banco Popular. The Spanish lender took over Popular last month for the symbolic price of 1 euro after the EU stepped in to save the failing bank. It is currently facing a landslide of law suits from investors who saw the value of their Popular shares and debt wiped out. Some retail clients will be offered free perpetual bonds which will pay 1 per cent interest annually and should be redeemable after seven years. But while the move might please disgruntled Popular clients, Santander shareholders might be less impressed: SOUNDBITE (English) DAVID MADDEN, MARKET ANALYST, CMC MARKETS: "I don't think it'll be overly welcomed seeing as I see it more like a move by the Spanish government to shore up the national banking system rather than a decision which was driven by Santander shareholders." Santander's offer excludes institutional investors but applies to retail clients who bought shares from from May 26 to June 21 last year - the period of Banco Popular's last capital increase. It also includes retail clients who bought subordinated debt in two 2011 issues of Popular. Customers who invested up to 100 thousands euros would receive the full amount of the investment. But to do so, they will have to waive their right to launch legal actions against Santander. Over 100 thousands clients might benefit from the plan. With many among them already filing lawsuits to determine who is responsible for their loss it might just be a worthy price to pay for Santander after all.