Santander's Botin puts capital first amid lending push

(Recasts with listing plans, adds quotes, cost cuts target)

By Sarah White and Jesús Aguado

MADRID, Sept 23 (Reuters) - Spain's Santander said listing its subsidiaries was no longer a priority as it eyes more cost cuts and aims to strengthen its capital in the next three years, putting the spin-off of its British business on the back burner.

Boss Ana Botin, who in her year at the helm has overhauled management at the euro zone's biggest bank, is seeking to persuade investors that a lending push in countries such as Britain and the United States will deliver higher returns.

The bank is also looking to reassure investors over its capital position, which lags that of major peers in Europe, and is focusing on improving performance in its core markets rather than expanding its reach.

"Over the past 12 months we laid the foundations for the bank we want for the next 10 years," Botin told investors at a strategy presentation in London on Wednesday, according to slides published by the bank.

Santander's top executive took over from her late father Emilio last September. As she puts her stamp on the business, Ana Botin has shifted away from some policies favoured by her father, including that of overseas acquisitions and the successive listing of its subsidiaries.

She (Munich: SOQ.MU - news) also cut the bank's dividend.

Santander said on Wednesday it would pursue "disciplined" mergers and acquisitions, and would not prioritise flotations as it seeks instead to grow its dividend from 2016 onwards and reach double-digit growth in earnings per share by 2018.

A long-mooted stock market listing of Santander's British business had already been pushed back and was not expected to take place within the next two years.

Instead the bank is making a push to win over small business clients and other borrowers and to reduce costs. Santander hiked its cost savings target to 3 billion euros by 2018, from the 2 billion it had previously set for 2016.

It (Other OTC: ITGL - news) aims to have a core capital ratio of more than 11 percent by 2018 under the strictest "fully-loaded" international criteria, up from 9.83 percent at the end of June, which would put it line with rivals.

The bank said it was looking to reach a return on tangible equity (ROTE), a measure of profitability, of around 13 percent by 2018. It had previously aimed for ROTE by 2017 of between 12 and 14 percent.

Santander shares were up 0.6 percent at 4.90 euros by 1004 GMT, having earlier in the session touched their lowest in two years. The stock has lost 27 percent in the past six months, hurt by the dividend cut and capital hike, versus a 15 percent drop in Spain's IBEX 35 index. (Additional reporting by Steve Slater in London; Editing by David Holmes)