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In one of the largest I.P.O.’s ever in Mexico, Banco Santander, S.A. (NYSE:SAN) (MCE:SAN), of Spain, announced on Tuesday that it is planning raise as much as $4.2 billion through the initial public offering of its Mexican unit.

Santander’s Mexican unit is the country’s fourth largest-bank, based on assets. The listing of the Mexican unit comes at a good time of robust economic growth, backed by a strong local demand. Along with the IPO, American depository receipts of the unit would also list on the New York Stock Exchange. Santander estimates a capital benefit of c.0.5 percent from the transaction.

Madrid based, Santander, will sell almost 24.9 percent of Grupo Financiero Santander México within the price range of 29.00 pesos ($2.20) to 33.50 pesos a share. As per the regulatory filing, around 20 percent of the shares will be open for Mexican investors and the remaining will be offered to international investors. The three week trade show is expected to start by Tuesday and the shares of the Mexican unit will be up for trading in Mexico and New York by the end of September. “We want to continue playing a part in the growth of Mexico,” Santander’s chairman, Emilio Botín, said in a statement. “Our goal is to list our most significant subsidiaries within five years,”

Money raised from the IPO will be used to compensate for the struggling domestic market, owing to European debt crisis. The decision is in line with Santander’s stated strategy of having a listed subsidiary, and with further plans of listing all the major subsidiaries within five years.

The Mexican unit has been an important performer for Santander, as in 2011 it contributed 13 percent to the group’s profits, despite holding only 2 percent of Santander’s loan book..

For the second quarter Banco Santander, S.A. (NYSE:SAN) (MCE:SAN) reported a 93 percent drop in its earnings, mainly due to the increased provisioning to cover bad loans. Banco Santander, S.A. (NYSE:SAN) (MCE:SAN) is not the only bank with such problems; the same case is apparent with every other bank in the region. Bankia, a merger of seven savings banks listed on the Madrid stock market, posted a €4.4bn loss in the first half, after being forced to make provisions of €2.7bn against bad property loans. Spanish banks, including Bankia, have incurred huge losses as they have raised provisions to cover bad loans made during the country’s decade-long property bubble. According to an announcement today concerning Bankia, Spain’s state bank bailout fund will transfer €4.5bn into Bankia to help it restore its capital levels.

Banco Santander, S.A. (NYSE:SAN) (MCE:SAN), UBS AG (NYSE:UBS), Bank of America Corp (NYSE:BAC) Merrill Lynch, and Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) are coordinating the I.P.O.