Shares in Santander, the owner of Abbey and Alliance & Leicester, fell by more than 5 per cent yesterday after the Spanish bank announced a surprise rights issue of €7.2 billion (£5.9 billion).

The capital-raising stunned investors after Santander appeared to have weathered the worst of the credit crunch without needing recapitalisation. Shares in the bank fell 42 cents to close at €7.92.

The bank said yesterday that recapitalisations in the sector across Europe had “changed the rules of the game”, prompting investors to demand higher capital ratios from all banks. It insisted that the cash call did not reflect a deterioration in its business.

Santander's core equity Tier 1 ratio, which is a measure of financial strength, will rise from 6.3 per cent to 7 per cent after the rights issue.

Simon Maughan, an MF Global analyst, said: “There's a new norm for capital adequacy standards in Europe. We're dealing with a deep and nasty [economic] cycle and they [Santander] are not immune to it.”

Shareholders will be offered 1.5 billion new ordinary shares at €4.50 a share, a 46 per cent discount to the close on Friday. The new shares will be listed on the Madrid stock exchange on December 4.

So far Spain has resisted pressure to recapitalise its banking industry, which has been hit by a plummeting property market and its exposure to the deteriorating economies of Latin America.

Santander declined to take part in Britain's £500 billion banks bailout plan, instead moving £1 billion within the group to bolster Abbey's capital ratios.

Santander said yesterday that it had no further acquisition plans and that it would halt the sale of non-core assets until the market improved. The bank will keep its dividend flat in 2009.

The rights issue is fully underwritten. Merrill Lynch and Bank of America are expected to be among the underwriters.

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