Santander and Deutsche Bank shares dive after US stress test failure

Shares in Santander and Deutsche Bank have fallen 3% and 4% after their US offshoots failed stress tests there for the third and second year running.

Officials from the Federal Reserve said that the two had “broad and substantial weaknesses across their capital planning processes”, and though both had adequate capital, their plans were based on assumptions and analysis which “are not reasonable or appropriate”.

The failure is a blow to Santander’s chairman Ana Botin, who said in March 2015 that the US operation under its new management had to pass the tests within two years or she would consider selling it.

The US bank, with 670 branches in the north-east of the country, said it is already fixing problems for next year’s tests.

By contrast, 30 US banks, including Bank of America, Citi and JPMorgan, passed the Fed’s stress tests and several of them immediately said that they would raise their dividend or share buybacks this year as result.