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The possibility that Santander Brasil’s (NYSE:BSBR) corporate parents are gearing up to sell up to 310.8 million of their American shares is viewed as a threat by analysts at Itaú BBA.

“We believe that the eventual sale of ADRs by the controlling shareholders will create an overhang, negatively affecting both BSBR and SANB11”, analysts say in their latest note on BSBR as well as the shares traded in Brazil.

The prospect that Santander Spain (STD) will sell 8.3% of its Brazilian affiliate to raise cash is now a very real possibility.

At recent prices, that sale would push an added $2.3 billion of BSBR onto the market.

However, Itaú BBA takes into consideration that STD will sell roughly 5% in Santander Brasil to Qatar Holding, leaving a smaller position of 3.2% or 121 million ADRs for the market to absorb.

Therefore, they maintain that the benefits for STD to outweigh any negative impact on the stock.

“It will be positive for Santander Spain to anticipate the sale of this 5% stake, given that it will generate a capital gain in its financial statement,” they say.

Itaú maintains a target of about $11.42 per BSBR ADR — 47% above current levels — but prefers Bradesco (NYSE:BBD) and Banco do Brasil (OTCPK:BDORY) as long as the overhang threat continues.

Source: Brazil Analysts Wary Of $2.3 Billion Santander Overhang