July 21 (Bloomberg) -- Banco Santander SA, Spain’s biggest bank, may sell a minority stake in its Brazilian unit in a primary share offering to raise funds from the lender’s largest Latin American business.

The division said in a filing to regulators in Rio de Janeiro today that it hasn’t decided whether to go ahead with the sale and any decision will depend on market conditions. Valor Economico newspaper reported Santander may raise as much as 6 billion reais ($3.2 billion) from the sale.

Santander, which paid 11 billion euros ($15.6 billion) in 2007 to buy ABN Amro Holding NV’s Banco Real unit in Brazil, is targeting two-thirds growth in profit from the country by 2010 as the company aims to become its biggest private lender. A Brazil share sale would boost the capital position of the whole group as Santander is buffeted by recessions in Spain, the U.K. and Mexico, said Daragh Quinn at Nomura International in Madrid.

“It’s capital for the local unit but on a group level it also has an effect,” Quinn said in a phone interview. “In that sense, it’s a positive.”

Chairman Emilio Botin said in October that the Santander, Spain-based bank would invest 2.56 billion reais in Brazil and open 400 branches over two years to expand the business of a unit that accounts for almost a fifth of profit.

Stock Rally

Brazil’s benchmark Bovespa stock index has rallied 41 percent this year on speculation record low interest rates and rising demand for the country’s commodity exports will boost growth in Latin America’s largest economy.

Cia. Brasileira de Meios de Pagamento, the Sao Paulo-based processor of payments for Visa Inc., raised a record 8.4 billion reais last month in Brazil’s first initial public offering in a year. BRF-Brasil Foods SA, Brazil’s largest food producer, and shareholders of Natura Cosmeticos SA, the biggest cosmetics maker, also are selling stock as the equity market climbs.

Santander may want to take advantage of higher valuations enjoyed by banks in Brazil, Quinn said. Itau Unibanco Holding SA, Brazil’s biggest lender, trades at 13.3 times estimated 2009 earnings, compared with 9.5 times for Santander.

To contact the reporter son this story: Laura Price in London at lprice3@bloomberg.net; Charles Penty in Madrid at cpenty@bloomberg.net

Last Updated: July 21, 2009 13:41 EDT