Europe's second-biggest bank by market capitalisation after HSBC, Spain's Banco Santander has announced that it will raise $9.2 billion selling new stock in a rights offer to boost capital after going on a shopping spree acquiring other banks at firesale prices during the global economic turmoil.

Under the plan, the bank will offer almost 1.6 billion new shares, which works out to one share for every four in circulation, at €4.5 each.

In spite of the credit crunch and economic slowdown, the bank had posted a third quarter net profit rise of 4.3 per cent to €2.2 billion last month and said it was moving in the right direction to post a record full year profit.

''We have taken the strategic decision to operate with higher capital ratios within an environment of greater uncertainty and a market demand for higher capital ratios in the financial industry," it said in a presentation.

Other European banks who have raised rights issue to increase its Tier-1 capital ratio are Italy's UniCredit, Royal Bank of Scotland and Britain's Barclays has also announced making a rights offer.

Santander was one of the many leading banks invited by the British government in talks on the UK bailout but Banco Santander and HSBC were among the few banks that spurned the British government recapitalisation plan and opted to raise the Tier-1 capital ratio on its own.

It also dipped into its own resources and boosted the tier-one capital ratio of its UK subsidiary, Abbey-A&L to about 9.25 per cent.

Santander's group Tier-1 capital ratio is at 7.89 per cent which is considered not very healthy and its core Tier-1 ratio is 6.31 per cent.

According to experts, the ratios would have been thought to be strong a few months ago but look weak compared to the European average for major banks of over 9 per cent for core capital.

Santander has decided not to go ahead and sell some of its asset management units to help pay some of its debts due to deteriorating market conditions.

Its rock solid financial position had allowed it to go on a shopping spree to buy three troubled banks over the past four months.

In July, it acquired the beleaguered British mortgage lender Alliance & Leicester in a deal valued at £1.26 billion (See: Spain's Banco Santander buys UK mortgage lender Alliance & Leicester for $2.6 billion) 

In the month of June, it juggled its European portfolio by swapping $1.6 billion of assets with the finance arm of American conglomerate General Electric last month. (See: GE Commercial Finance and Spain's Banco Santander to swap $1.6 billion of assets) 

In September, the British government nationalized Bradford and Bingley since major banks refused to rescue Bradford & Bingley or acquire it, because of its £41 billion in mortgages. (See: Third British bank set to fall as B&B is nationalized) That's when Santander stepped in and acquired deposits and branches of the nationalized bank.

In a bid to gat a foot in the large Hispanic market in the US, Santander sought to fully acquire the 106-year old Sovereign Bank, the largest remaining US savings and loan bank for a reported amount of $2.53 billion in October. (See: Banco Santander bids $2.53-billion for distressed Sovereign Bancorp) 

Last month, Abbey, which is a UK subsidiary of Santander, had clinched a £1.4-billion deal with Antin Infrastructure Partners, a consortium of European bankers Deutsche Bank, Lloyds TSB and BNP Paribas, for its Porterbrook train leasing arm. (See: Banco Santander, HSBC's sale of train leasing arms expected to net £4 billion)

It had also bid for Washington Mutual and Wachovia in the US.