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Santander drives ahead with US car loan float

Santander plans to float its American car loans division on the US stock market, which could value the business at more than $8 billion (£5.3 billion).

Spain’s biggest bank said in a filing to the US Securities and Exchange Commission that it would press ahead with a proposal to list shares in Santander Consumer USA. The transaction could complete by the end of the year.

Santander owns 65 per cent of Consumer USA, which offers car loans through about 14,000 US dealers, including Chrysler, where it has a ten-year deal to be its preferred provider of financial services.

The business, based in Forth Worth, Texas, has a loan portfolio of about $19.6 billion and generated net profits of $715 million in 2012 and $290 million in the first quarter of this year.

The remainder is held by three private equity firms — KKR, Warburg Pincus and Centerbridge Partners — and an investment vehicle linked to Tom Dundon, the co-founding chief executive.

These investors could use the share sale to exit some or all of their holdings, leading to a potential payday for Mr Dundon, whose vehicle subscribed for $150 million of shares in October 2011.

At the time of the fundraising, the private equity groups invested $1 billion. Such firms tend to retain their holdings for periods of three to five years.

Santander said in the filing that Consumer USA planned to expand its dealership network. It also said that it would join forces with other consumer finance providers to boost its lending portfolio.

It did not say how much of Consumer USA it would sell on the public market or the timing for a sale.

However, The Wall Street Journal reported that the Spanish bank was aiming for a valuation of more than $8 billion and a flotation in the fourth quarter.

It also said Santander was working with banks on the listing, including Bank of America Merrill Lynch, Citigroup and JPMorgan Chase. Santander declined to comment beyond the detail in the filing.

The bank entered US consumer finance in 2006 when it bought Drive Financial from a syndicate of investors including HBOS, now part of Lloyds Banking Group. It has since expanded the business through acquisitions of portfolios from HSBC, Citi, GE Capital and others.

The sale is not thought to be directly linked to Santander’s need to raise capital to bolster its financial strength. Following EU-wide stress tests last year, the European Banking Authority said that it needed to raise an additional €15.3 billion of funds.

The bank separately lists its overseas interests and has done so recently in countries including Brazil.