The Spanish bank Santander, which is also the largest lender in Europe, announced on Thursday that it opened its first branch in Sydney. The opening of its first Australian unit is seen as the bank's way of boosting its presence in the Asia-Pacific region.
Santander said the branch would help Australian firms with trade and investment activities in Europe and Latin America which are its home markets. The bank made the disclosure after it secured approval from the Australian Prudential Regulation in December.
The Sydney branch started to operate in January with focus on wholesale banking.
Besides Australia, Santander is also expanding its presence in Asia-Pacific by opening units in Hong Kong, Shanghai and Singapore.
Juan Manuel San Roman, chief executive for Asia-Pacific of Santander, said it opened the Sydney branch because many of the lender's global clients also have significant presence in Australia. Through the Sydney unit, Santander aims to do business locally with these companies.
Meanwhile, a Spanish court in Alicante ruled on Wednesday against Santander in a lawsuit related to the $9.2-billion sale of convertible bonds the lender made to 129,000 clients in 2007. The court annulled the bank's sale of €45,000 worth of bonds to one of its clients and ordered Santander to pay back the amount, plus interest less the yield the client received since the sale.
The bondholder, prison therapist Jorge Segura, claimed that Santander employees made him believe the paper was risk-free and short-term investment product. The bank denied Mr Segura's claim, but the court ruled in favour of Mr Segura and voided the contract.
The ruling has the potential of being replicated by the other clients who bought the convertible bonds. The court gave Santander 20 days to appeal its decision to a higher court.
Value of the bonds, also called Valores securities, has dropped by more than 50 per cent since it was issued in October 2007 because it is tied to the bank's share prices. It has resulted in €4 billion paper losses for the bondholders. The bonds will automatically become common stock in October 2012.
Securities lawyers and consumer groups charged Santander with not properly informing them of the investment's risks and are now contacting hundreds of bond buyers with the aim of filing a class-action lawsuit against Santander.
Santander used the money raised from the bond sale to buy its €72-billion purchase of ABN Amro from two European banks. The bonds promised 7.5 per cent interest rate on the first year and 2.75 percentage points above the European interbank lending rate for the remaining four years. Had the ABN Amro bid of Santander failed, the Spanish lender promised to return the cash after a year, which gave the Valores a deposit-like feature.
However, since the success of the ABN AMRO bid, the bond holders would only profit if Santander's stock went up by at least 16 per cent over the next five years but as of Wednesday the bank's stocks in Madrid closed at €6.02. It would need the share value to reach €13.93 by October for the bond holders to earn the promised premium.
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